Today, if you decide to buy a car or say book a 7D/6N holiday package for Dubai, your bill might include one extra line item — TCS (Tax Collected at Source).
But, this isn’t any income that you’re earning, so why tax?
See, buying a car or travelling abroad are considered high-end purchases, and when someone spends that kind of money, the government likes to keep tabs. By collecting TCS, they get a better idea of who has enough income to afford these big expenses, and they can check if those people are also paying their taxes properly.
TCS is a tax collected by sellers when they sell certain goods or services worth more than a specified threshold. This tax is then deposited with the Income Tax Department under your PAN. For instance, if you buy a car worth ₹20 lakh, the seller will collect 1% TCS, meaning you’ll pay a total of ₹20.2 lakh.
Now, TCS rates vary depending on the type of purchase and its value. Here are some common scenarios:
- High-value car purchases: If you buy a car that costs more than ₹10 lakh, the seller collects TCS at 1% of the total value.
- Foreign travel packages: TCS applies at 5% for amounts up to ₹7 lakh and 20% for anything above that on foreign travel packages. This includes things like international flights, hotel stays, and other travel-related expenses bundled together. However, standalone purchases like just a flight or hotel booking don’t attract TCS.
- Foreign remittances (under the Liberalized Remittance Scheme - LRS):
- For general purposes, such as investments or personal expenses, TCS is collected at 20% on amounts over ₹7 lakh.
- For remittances related to education (when funded by an education loan), TCS is 0.5% on amounts above ₹7 lakh.
- For medical treatment or education (without a loan), TCS is 5% on amounts exceeding ₹7 lakh.
Now, while it might seem like an extra tax burden, TCS isn’t actually part of your tax liability, and you can claim a refund of this amount when you file your ITR.
How to claim TCS refund?
It’s simple, you just need to file your ITR to claim TCS refund. When you file your ITR, enter the TCS amount, similar to how you include TDS or any other taxes paid.
Make sure to verify that the TCS is reflected correctly in your Form 26AS. This form shows a summary of all taxes collected and deposited on your behalf, including TCS.
However, if you have any outstanding tax dues, the TCS will first be adjusted against that, and the remaining amount (if any) will be refunded to you once your ITR is processed.