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Buying a new car is not just an upgrade for the ride or, for that matter, upgrading the lifestyle but rather can offer great financial benefits as well. After all, be it any form of tax saving, when it is about buying a new car, something that will keep saving money by owning the pleasure of driving around is knowing the right way of applying them appropriately. A leading player in the insurance domain, Coverfox makes available information on how taxes and other things may work on the ownership.
1. Tax Benefits for Entrepreneurs and Professionals
You are an entrepreneur or a professional. You would be buying that new car; you can always claim tax deduction. Cars completely or partially used for business purposes are assets in themselves, which can be allowed as business expenditure. Here’s how you can do it:
Depreciation Deduction:
With each passing year, the car undergoes depreciation; you can declare the depreciation on purchase price every year against your business to reduce the level of your tax exposure.
– Fuel and Maintenance Cost:
The usage of fuel in running the vehicle, as well as repairing costs and servicing will also qualify you for the declaration of expenses; the more, the merrier.
– Deduction on Car Loan Interest:
If you’ve taken a car loan for your business vehicle, the interest paid on the loan is eligible for tax benefits.
2. Tax Benefits for Self-Employed Individuals
Self-employed individuals can also claim tax benefits similar to business owners. The key is to demonstrate that the car is being used for professional purposes. Documentation of fuel bills, maintenance costs, and business trips is crucial to justify your claims.
3. Benefit of Section 80EEB for Electric Vehicles
The government also encourages adopting greener alternatives and offers additional tax benefits for electric vehicle purchase. Further, in Section 80EEB of the Income Tax Act,
– The entire interest paid on loans taken for purchasing an electric car may be duly considered as deduction by the buyer of the electric car up to Rs 1.5 lakh.
– It is available up to the full repayment of the loan, but only if the loan was sanctioned between April 1, 2019, and March 31, 2023, and may be extended further by future regulations.
4. GST Input Tax Credit
The purchase of a car comes under the input tax credit for businesses, which are registered under GST. In this case, if the vehicle is used for transporting goods or passengers, or for training, then input tax paid on the GST incurred while buying the car can be availed. Thus, it decreases the total cost of the vehicle.
5. Tax Benefits for Salaried Individuals
For salaried individuals, they may not have the same options as business operators of direct tax-saving, but still, there are ways that cut down on expenditure.
– Employer-Provided Vehicles:
The fuel costs, maintenance, and salary of the driver for using the car offered by your employer are considered reimbursed to lessen the taxable income of the person.
– Lease Plans
You can take up a car from your employer by paying the amount of lease to your employer on a pre-tax basis, thereby decreasing your tax outgo.
6. Car Loan Benefits: Tax
Here, a loan is taken again by spreading out the burden of the amount and this also happens to have benefits of tax potential.
– Business owners and professionals can claim the interest paid on car loans as a deduction if the vehicle is used for professional purposes.
– For EV buyers, the interest paid is deductible under Section 80EEB, as mentioned earlier.
7. Tax Benefits on Selling an Old Car
If you’re selling your old car to fund your new purchase, there are tax implications to consider:
– Capital Gains Tax:
If your old car is an asset of the business, you will have to pay capital gains tax on any profit from the sale. You can, however, offset this gain by buying another asset like a new car under certain conditions.
8. More Savings with Insurance
Insurance is another area where you can fine-tune your finances:
– Business Use:
If the car is insured as a business asset, the premium paid for insurance can be claimed as a deduction.
– Comprehensive Coverage:
Opting for comprehensive insurance policies from Coverfox not only protects your car but also ensures peace of mind. Policies tailored for EVs or high-value cars often come with added perks that maximize savings in the long run.
9. How to Claim Tax Benefits
Keep all records with accuracy to avoid paying taxes. You will need the following.
– Invoices and Receipts:
Carry with you all your purchase invoices, loan statements, and receipts.
– Usage Records:
Keep record of the business usage of your car, with a log of miles traveled, and details of trips.
– Insurance Papers:
Your car insurance should be current, based on the usage that you are putting in.
10. Prudent Purchase Planning
Plan the purchase of your car wisely to benefit from all of these advantages:
– Right Model:
According to your professional and personal needs, choose the appropriate car for you. Electric cars are ideal to utilize the highest possible tax relief.
– Time It Right:
The last month of the financial year is an appropriate time to make a car purchase to obtain maximum relief.
– Comprehensive Insurance:
Such a policy will guard your investment through immense cover and will correlate with your goals economically. Various insurance options on a Coverfox website will take care of all your requirements.
Owning a car is one of the major financial decisions in a person’s life, but if done smartly, it can also be a tax-smart move. Be it a salaried employee, a self-employed professional, or a business owner, the tax benefits that a new car may bring in can result in substantial savings.
At Coverfox, we commit ourselves to helping you navigate the often complex world of car ownership-from finding insurance policies that best suit you to ensuring maximum tax benefits through our team of experts. Invest your dream car right, and get it protected so that it supports your financial future.
