Loans and tax deductions are often linked in India. For home loans, education and even in some situations, personal loans, you are entitled to tax exemptions. What about the car loans, however? But are these advantages not valid for loans to buy a car? Can you expect tax savings on your car loan? If yes, how can you claim it? Read this article to know. People often take various loans because of tax advantages and Is it also feasible for you to pay these taxes while you take a car loan? Check Car Loan Tax Benefits below.
Why Go for Car Loans?
Formerly a luxurious item, but for various reasons in today’s economically-developed world, a vehicle, from specialist to recreation, would be a requirement. The purchase of a car is about luxury and comfort, as well as ease, versatility and more.
Also, Check – What Should You Check Before Buy a Used Car?
Car is perceived to be a luxury commodity in India and reportedly receives a 28 percent (GST) maximum goods and services tax.
But you can report the interest paid in a year as a cost and the taxable income if you own a luxury vehicle. The tax credit is eligible only for the interest and not the principal sum portion of the loan.
Sure, if you are a self-employed worker or company owner and use the vehicle for business purposes you can save the tax by using a car loan.
Cars fall into the luxury item group and as such a tax benefit is not applicable to those who buy a vehicle and car loan.
Top Tax Benefits:
But most people do not know that they can also benefit from tax deductions on car loans.
Several major points on Indian car loans are described below:
- Car loans from individual consumers do not offer tax advantages.
- In that sense, the interest paid for servicing is eligible to receive tax benefits in compliance with Article 80C of the IT Act, when the car loan for a commercial/business automobile was bought by your own workers.
- You are allowed to deduct interest on a loan for a vehicle in your business. When you take a home equity loan to buy a commercial car, investors can even exclude interest. Only the amount of interest and tax on a vehicle that you use can be excluded for business and personal purposes.
- You must use the vehicle for lawful commercial purposes to assert deductions from your loan.
- The IT assessor has a distinct right to deny the payment because she concludes that you didn’t use the car for professional or business reasons
- The car must be registered on behalf of the company or company owner (where it is a corporation or professional)
- Another option to save taxes is to view it as a lower the price and the depreciation as an expense. You will downgrade the vehicle by up to 15% in one year. You can deduct this depreciation, whether you choose a car loan.
The Process to Claim for Tax Benefit:
You should first file the reports to claim tax benefit to your car loan. And find out how much interest you received, ask your bank and grant a certificate of interest. This shows you precisely how much interest you pay. Hold the document ready.
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