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TCS on Sale of Motor Vehicle


Section 206C (1F) TCS on Sale of motor Vehicle above Rs 10 Lakh, As earlier provision under section 206C, TCS was only collected on Tendu leaves, Scrap, Jewellery, Bullion, Toll plaza, Parking etc. In recent years, the scope of TCS is being extended in an effort to curb tax evasion and black money transactions. In 2012, certain transactions affecting customers—receipts in cash, for sale of bullion exceeding Rs.2 lakh, and of jewellery exceeding Rs.5 lakh—was brought within its ambit.


Budget, 1 June 2016, Finance Minister in his Budget Speech has used the word ” Luxury Cars ” but , having regard to the language used in provision of Section 206C (1F) , it is not limited to the sale of luxury cars and are applicable on sale of any Motor vehicles* of the value exceeding Rs 10 Lakh.

  The following provisions are as under-
  1. TCS is applicable on sale of Motor Vehicle above Rs. 10.00 lakh
  2. TCS on sale of motor vehicle is applicable w.e.f. 01.06.2016.
  3. TCS will be charged @ 1% on Invoice Value i.e. also includes tax amount (GST)
  4. Motor Vehicle includes Truck, Buses, Two wheelers, Cars or any other motor vehicle.
  5. Second hand sales of vehicle would also be subject to TCS, if the sale value exceeds Rs.10 lakh.
  6. TCS on Sale of motor Vehicle above Rs 10 Lakh to be collected by Seller at the time of receiptof such amount.
  7. TCS applicability is with respect of each sale and not with reference to the aggregate value of sale during the year.
  8. TCS provisions on sale of motor vehicle is not dependent upon the mode of payment whether the transaction may be in cash or by the issue of a cheque or draft or by any other mode.
  9. It covers all retail sales and accordingly will not be applicable on sale of motor vehicles by manufactures to dealers/distributors.
  10. Government, institutions notified under United Nations (Privileges and Immunities) Act 1947, and Embassies, Consulates, High Commission, Legation, Commission and trade representation of a foreign State shall not be liable to levy of TCS at the rate of 1 % under sub-section (1D) and (IF) of section 206C of the Act.

As the section 206C (1F) read as follows “Every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding Rs. 10.00 lakh, shall at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration (Sale consideration not defined, but in general sale consideration means total invoice value which includes Tax amount i.e. GST).


*Motor vehicle’ has not been defined specifically under the Income Tax Act. However, it is defined under section 2(28) of the Motor Vehicle Act, 1988, which read as under:

‘”Motor vehicle” or “Vehicle” includes any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted there to from an external or internal source and includes

a chassis to which a body has not been attached and

a trailer;

{as per section 2(46) “trailer” means any vehicle, other than - * a semi-trailer and * a side-car drawn or intended to be drawn by a motor vehicle}

{as per section 2(39) “semi-trailer” means a vehicle not mechanically propelled (other than a trailer), which is intended to be connected to a motor vehicle and which is so connected that a portion of it is super-imposed on, and a part of whose is borne by the motor vehicle}

but does not include

a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or

a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty five cubic centimeters.”


For Example - If the value of motor vehicle is 20 lakh rupees, out of which Rs. 5 lakh has been paid in cash and balance amount by way of cheque, the tax shall be collected at source at the rate of 1% on total sale consideration of 20 lakh rupees only under sub-section (IF) of section 206C of the Act. However, if a vehicle is sold for 8 lakh rupees and the consideration is paid in cash, tax shall be collected at source at the rate of 1% on 8 lakh rupees as per sub-section (lD) of section 206C of the Act.


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