Section 206C(1F) of the Income Tax Act, 1961 requires sellers to collect tax at source (TCS) on the sale of motor vehicles exceeding a prescribed threshold. Effective from 1st April 2025, the scope of this section has been broadened to include other luxury items.
Applicability of Section 206C(1F)
TCS is applicable where the seller receives sale consideration for either:
A motor vehicle or Luxury goods, where the invoice value exceeds ₹10,00,000, irrespective of whether the goods are purchased for personal or business use.
The seller is required to collect tax from the buyer at the time of receiving the amount or debiting the buyer’s account, whichever occurs earlier. The provision is transaction-specific and does not aggregate multiple sales. If one item sold exceeds the prescribed threshold, TCS becomes applicable on that transaction alone.
Responsibility to Collect TCS
The liability to collect tax rests with the seller, which includes manufacturers, dealers, or any person selling above the threshold. The TCS must be collected at the time of receipt of consideration or at the time of debiting the buyer’s account, whichever is earlier.
There is no exemption available under Form 27C. The section also does not exclude government entities, public sector undertakings, or foreign missions from its purview.
The only exception to the rule applies where the buyer is a dealer purchasing for the purpose of resale as part of their regular course of business. In such cases, the transaction is treated as part of trading activity and not final consumption, and TCS is not required.
There are no additional exemptions based on the purpose of the purchase, financing method, or category of buyer.
Rates of TCS
The applicable TCS rates under Section 206C(1F) are based on the nature of the goods sold. As of April 2025, motor vehicles and notified luxury goods exceeding ₹10 lakh are all covered under this section.
| Collection Codes under section 206C | Nature of Goods | TCS Rate |
| L | Motor vehicle (value exceeding ₹10 lakh) | 1% |
| MA | Wrist watch | 1% |
| MB | Art pieces such as antiques, paintings, sculptures | 1% |
| MC | Collectibles such as coins and stamps | 1% |
| MD | Yacht, rowing boat, canoe, helicopter | 1% |
| ME | Sunglasses | 1% |
| MF | Bag such as handbag, purse | 1% |
| MG | Pair of shoes | 1% |
| MH | Sportswear and equipment such as golf kits and ski-wear | 1% |
| MI | Home theatre system | 1% |
| MJ | Horse for horse racing or polo | 1% |