As of October 1, 2023, the Indian government has introduced a Tax Collected at Source (TCS) on the purchase of vehicles exceeding the value of 10 lakh rupees. This significant move aims to streamline tax collection and improve transparency in high-value vehicle transactions. Individuals procuring such vehicles must comply with the new TCS regulations, as non-compliance may have adverse consequences for both buyers and auto dealers.
TCS Rates and Conditions for Vehicle Purchases
Under the newly introduced TCS regulations, buyers are required to pay a 1% TCS on vehicles exceeding the 10 lakh rupee threshold. However, failing to furnish a Permanent Account Number (PAN) to the seller could elevate the TCS rate to a substantial 20%. Moreover, individuals who have not filed their Income Tax Returns (ITR) for the preceding two fiscal years will be subject to a TCS rate of 5%.
Which Vehicles Are Subject to TCS?
The TCS provisions apply to vehicles with a value exceeding 10 lakh rupees and meet the following criteria:
- Vehicles with four or more wheels.
- Motorcycles.
- Scooters.
- Customized vehicles that are legally fit for road use.
- All vehicles subject to these provisions must have an engine capacity of 25CC or more.
However, if the vehicle’s price falls below the 10 lakh rupee threshold or if the engine capacity is less than 25CC (even if the price exceeds 10 lakh rupees), the TCS regulations will not be applicable.
Where to Purchase These Vehicles
Vehicles subject to TCS can be procured from authorized car or bike dealerships, second-hand markets, or imported through a dealer.
Who Can Collect TCS?
Entities eligible to collect TCS include the Central Government, State Governments, local authorities, corporations, firms, co-operative societies established under central or state acts, and individuals whose income from business or profession exceeds specified limits defined under the Income Tax Act.
Higher TCS Rates: When Do They Apply?
Buyers may face higher TCS rates under the following circumstances:
- If they have not filed ITR for the two fiscal years preceding the current fiscal year.
- When the cumulative total of TCS and Tax Deducted at Source (TDS) collected in each of the two fiscal years prior to the current fiscal year surpasses 50,000 rupees.
Essential Information Snapshot:
- TCS Implementation Date: October 1, 2023
- Standard TCS Rate: 1%
- TCS Rate for Non-PAN Holders: 20%
- TCS Rate for Non-ITR Filers: 5%
- Vehicle Price Threshold: Exceeding 10 lakh rupees
- Engine Capacity Requirement: 25CC or more
Frequently Asked Questions (FAQs):
- What is the new regulation concerning TCS on vehicle purchases?
Effective from October 1, 2023, TCS will be imposed on vehicles costing more than 10 lakh rupees. - What are the applicable TCS rates?
The standard rate is 1%, which escalates to 20% if no PAN is provided, and 5% if the buyer hasn’t filed ITR in the previous two fiscal years. - Who is authorized to collect TCS?
Entities authorized to collect TCS include government bodies, local authorities, corporations, companies, co-operative societies, and individuals with income exceeding specific limits. - Are there any exceptions to the TCS rule?
Yes, vehicles priced below 10 lakh rupees or those with an engine capacity less than 25CC are exempted. - When do higher TCS rates come into play?
Buyers may face higher TCS rates if they haven’t filed ITR for the two fiscal years preceding the current fiscal year or if the cumulative TCS and TDS collected in each of the two fiscal years prior to the current fiscal year exceed 50,000 rupees.
