When buying your first car and signing loan documents, be aware of potential tax benefits for savings. Car loans may offer tax advantages like other loans, so understanding the applicable circumstances is crucial. ## **
Car Loan Tax Exemption Under Section 80C
According to the Income Tax Act’s Section 80C, tax benefits are available on the interest paid on a car loan, but with a catch. These benefits can be claimed only if the car is purchased for business use. Unfortunately, if the car is acquired for personal use, the tax benefit cannot be claimed, given that a car is deemed a luxury item in India. **
Eligibility For Tax Benefits On Car Purchases
Tax benefits on vehicle loan interest are primarily applicable to self-employed individuals or business owners. For them, the interest paid is considered a business expense and gets deducted from the taxable income. However, salaried individuals purchasing a car for personal use do not enjoy this deduction, missing out on tax benefits related to the loan interest. **
Steps To Receive Benefits From New Car Tax
- Exclusive Work Use: Show the vehicle is solely for work, not personal travel, irrespective of employment
- Interest As Business Expense: Include car loan interest as a business expense when filing taxes, with the benefit applicable only to the interest, not the principal
- Depreciation Advantages: Business expenses for car depreciation are tax-free due to the vehicle being a depreciating asset, regardless of loan use
- Proportional Claim: If the car serves both personal and business purposes, claim interest and depreciation based on the personal to-business use ratio, e.g., 50% for business means 50% claim for tax benefits.
Tax Advantages For New Car Insurance
Tax benefits on comprehensive online car insurance apply to business owners if the vehicle is purchased and used for business purposes. Unfortunately, salaried individuals using the insurance for personal purposes do not qualify for these benefits. Meeting specific criteria, including providing bills, driving records, and travel history, can aid in claiming tax deductions on online car insurance premiums for business use. You can use a car insurance premium calculator to estimate the costs of premiums to be paid. ** *
Opting for a zero depreciation (zero dep) car insurance policy ensures comprehensive coverage without factoring in depreciation, providing greater financial protection in case of accidents or damages.
Tax Benefits For Salaried Individuals Purchasing Electric Vehicles
Salaried individuals can avail of tax benefits on car loans for electric vehicles under Section 80EEB, with a one-time deduction of up to ₹1,50,000 on interest paid. Exclusive to individuals, this benefit applies only to car loans approved between January 1, 2019, and March 31, 2023. **
Leveraging tax benefits when buying a new vehicle can result in significant savings. To qualify, obtain an interest payment certificate from the lender. Also, consider the one-time tax advantage under Section 80EEB for electric vehicles to save on interest payments. Being informed about income tax regulations related to car loans and third-party insurance is essential for making the most of available tax benefits. ## **
* Standard T&C Apply
** Tax benefits are subject to change in prevalent tax laws.
## All savings are provided by the insurer as per the IRDAI-approved insurance plan
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
