If your car is being used in business activities, then you can claim income tax rebate equal to the annual interest of the loan if the car. Apart from this, you can claim tax exemption even if you use a personal loan taken in the business.
new Delhi. Most taxpayers in the country invest in Tax Saving Schemes to get tax exemption. Income Tax Rebate is also available on home loans, education loans. At the same time, no tax rebate is available on a car loan because it is considered a luxury item. However, you can also avail tax exemption on the interest paid on a car loan. For this, it is important that your car should be used in business activities. In easy terms, if the car is being used for business or profession, then tax will be exempt. At the same time, if the car is being used in the transport business, then you can claim tax exemption on the entire interest.
Car loan interest in ITR has to be shown in business
You can claim tax exemption if you drive a car on loan or use it on a taxi or use it in a travel agency or do business on your own. At the same time, even if you are a professional, you can claim a tax rebate equal to the interest paid annually on a car loan. For this, the amount of interest paid will have to be shown as the cost of business while filling the Income Tax Return (ITR). You can also avail of a discount on the depreciation cost that comes every year. If your annual income from a business or profession is 10 lakh and you pay interest of Rs 70 thousand for a car loan, then the income tax will be calculated at 9.30 lakh. This does not include depreciation cost.
Taxpayers need to keep in mind that if the car is not being used in business activities, the tax exemption claim will be rejected. To claim tax exemption, take a certificate of interest from the bank. This certificate has to be produced when claiming the exemption. At the same time, the car should be registered in the name of the person who is claiming the tax exemption. During the claim, the Income Tax Officer can ask for proof of being used in the business of the car. If you are not able to give proof, then you can also take legal action against the claim as false.
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even if they have bought a car from a personal loan, even
if taxpayer buys a car after taking a personal loan, income tax exemption can be claimed on interest. is. However, in such a case, you will be able to claim income tax exemption on the interest of personal loan on the year when you sell the car. The interest in the profits from the sale of the car will be reduced from the capital gain. This will reduce your tax liability. However, this car should also be used in business activities. In fact, in the case of taxpayers having income from business, the Income Tax Department gives tax exemption by considering the interest paid on the loan of the car as the cost of business.
the interest on electric car loans up to 1.5 lakhs is exempt
Finance Minister Nirmala Sitharaman, while presenting the first budget of Modi government-2.0, announced an exemption in income tax for electric car buyers. Under this, if a person buys an electric car, he will be given a tax rebate of up to Rs 1.5 lakh. This rebate will also be given on the interest of the loan taken to buy the electric car instead of the principal amount. Understand in simple terms, if you have paid interest of up to Rs 1.5 lakh on a car loan in a full year, then you can claim income tax exemption. Explain that income tax exemption on the interest of loan taken to buy electric car will be available under Section 80EB of Income Tax Act.
