TCS on sale of Cars
Analysis of Provisions relating to TCS on sale of Cars/ Sale of Motor Vehicle above Rs 10 Lakh
- section 206C of the Income Tax Act has been amended w.e.f 01.06.2016 to provide that the seller shall collect the tax at the rate of 1% from the buyer on sale of motor vehicle of the value exceeding ten lakh rupees.
- TCS at the rate of 1 % on sale of Motor Vehicle is not applicable only to Luxury Cars it will apply on sale of any motor vehicle of the value exceeding Rs 10 Lakh.
- Motor Vehicle has not been defined under the Income Tax Act .It is defined under section 2(28) of the Motor Vehicle Act, 1988 which reads as under :'”motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or avehicle 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 centimetres.”
The seller for the purposes of collection of tax under section 206C shall be –
(i) A Central Government or a state Government,
(ii) Any local authority, or corporation or authority established under any Central, State or Provincial Act,
(iii) Any company, firm or cooperative society,
(iv) An individual or Hindu undivided family who is liable to audit as per provisions of section 44AB during the financial year immediately preceding the financial year in which the goods are sold or the services arc provided.
- TCS on sale of car / any motor vehicle is to be collected from buyer .
As per Explanation (aa) of Section 206C
(aa) “buyer” with respect to—
…….
(ii) sub-section (1D) or sub-section (1F) means a person who obtains in any sale, goods of the nature specified in the said sub-section
- TCS on sale of car / any motor vehicle shall not apply in case of sale to 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.
- TCS on sale of car / any motor vehicle is applicable to each sale at the time of receipt of consideration and not to aggregate value of sale made during the year. This can be explained by way of an illustration:
Illustration: Motor vehicle worth 20 lakh is sold and for which payments are made in instalments, one at the time of booking and the other at the time of delivery. At the time of booking 5 lakh rupees are paid and 15 lakh rupees are paid at the time of delivery. Tax at the rate of 1 % on 5 lakh rupees at the time of booking and at the rate of 1 % on remaining 15 lakh rupees at the time of delivery shall be collected at source.
- TCS on sale of car / any motor vehicle is also to be collected by an individual who is liable to audit as per the provisions of section 44AB of the Act during the financial year immediately preceding the financial year in which the motor vehicle is sold.
- TCS on sale of car / any motor vehicle is to be collected @ 1 % on sale consideration of a motor vehicle exceeding ten lakh rupees. whether part of the payment is made in cash and part is made by cheque , it does not make any difference as this provision is not dependent on mode of payment .
- Section under which TCS to be deducted on sale of car / any motor vehicle if payment is in cash is explained as follow :-
- Example- 1:- if the value of motor vehicle is 20 lakh rupees , out of which 5 lakh rupees 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 (1F) of section 206C of the Act.
- Example -2 :-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(l D) of section 206C of the Act
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