new Delhi. A car is considered a luxury product and usually does not get tax exemption on its loan. But, if you are a professional or use the car for your business, then you can claim tax exemption while filing the return. The employed person does not get tax exemption on this.
Archit Gupta, Founder and CEO, Clear says that if you want to claim tax exemption on car loan, then it is necessary that it should be used for business purposes only. For example, you run it on rent. Use in a travel agency or run yourself for business purposes. Even if you are a professional, you can claim tax exemption equal to the interest paid annually on the car loan. For this, the amount of interest paid will have to be shown as cost of business while filing the return.
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Discount on oil and maintenance
Not only the interest on the car loan, but the fuel used annually and the expenses incurred on the maintenance of the car can also be included in the income tax exemption. Apart from this, the annual reduction in the purchase price of the car i.e. depreciation cost can also be availed. However, the tax exemption is available only on a certain amount of fuel spent and the depreciation cost is also up to 15-20% of the value of the car annually.
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understand this calculation
Suppose, if your annual income is Rs 10 lakh and you pay interest of Rs 70 thousand per annum to the bank for car loan, then income tax will be calculated at Rs 9.30 lakh. This will not include fuel and depreciation cost.
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take care of these things
If the car is not used for business purposes, then the Income Tax Officer can reject the claim.
For the claim, take the interest certificate from the bank. The Income Tax Department may ask for it as a verification.
The car should be registered in the name of the business concerned or its owner only.
Be careful in claims
Tax and investment advisor Balwant Jain says that taxpayers have to keep in mind that at the time of claim, the Income Tax Officer can ask for proof of the car being used in the business. If someone has presented a false claim, then not only will the claim be rejected, but the Income Tax Department can also take action. It is better that the taxpayer must mention all the necessary documents while filing the return.
Tags: car loan, income tax, Income tax exemption, ITR filing
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