Motor Vehicle includes Cars, buses, motorcycles, off-road vehicles, light trucks and regular trucks. In India there are more than 300 million operating vehicles. In this modern era everyone wants to be travel fast overcoming the hindrance of traffic and motor vehicles allows you to travel fast comfortably. India has 22 cars per 1000 individuals and purchase/sale of motor vehicles is normal thing now. Therefore tax affect on purchase/sale of motor vehicles plays a very vital role in one’s life. Let us discuss income tax implications on sale/purchase of Motor Vehicle along with some measures taken by Govt. to promote its sale.
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1. Tax on Sale of Motor Vehicle
If used for Business, then motor vehicle is considered as capital asset and chargeable to tax as Long term capital gain or short term capital gain as the case may be.
If used for personal purpose, then it is not a capital asset and does not attract tax on sale.
2. Tax on Purchase of Motor Vehicle
On purchase of motor vehicle TCS is required to be deducted by seller. Two sections are attracted of Income-tax Act, 1961. As per section 206C (1F) of Income-tax Act, 1961 Seller is required to deduct TCS @1% on sale of motor vehicle above 10lakhs. Also from 01/10/2020 seller is required to collect TCS@ 0.01% (0.075% due to Covid-19) on receipt of sum above Rs.50lakhs against sale of goods.
If buyer is dealer (B2B) – Then TCS is required to be collected u/s 206C (1H) from 01/10/2020.
If buyer is ultimate customer (B2C) – Then TCS is required to be collected u/s 206C (1F) and section 206C(1H) shall apply when consideration received for sale of motor vehicle is less than 10lakhs but aggregate value of which exceeds Rs.50lakhs.
3. Measures Taken by Govt. to Promote Sale of Electric Motor Vehicle
Deduction u/s 80EEB on Purchase of Electric Motor Vehicle-From 1st April 2020, additional deduction of interest paid on loan taken for purchase of electronic motor vehicle is allowed upto Rs.1,50,000/- to an Individual. This move is taken improve environment and reduce vehicular pollution.
4. GST on Motor Vehicle
GST on Motor vehicle is charged ranging from 12% to 28%. Along with GST composition cess is also levied ranging from 1% to 22%. The rates are charged depending on Petrol car, Diesel Car, Electric Cars, engine capacity, ambulance, etc.
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The above comments do not constitute professional advice. The Author can be reached at companyfinancialtree@gmail.com or visit website www.financialtreecompany.com . My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company) where we have taken an initiative that allows person to Pay from Heart. We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.
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We have purchase a commercial vehicle in our private limited company in 2017 of Rs. 14,86,000/-. According income tax rule what is value in 2024-25.
I have purchased Maruti ertiga cng on 20/08/2022. at that time dealer had deducted TDS 11000. That’s why my tds rose by 48000. I have purchased car by loan. please advice me the exemption from tds on purpose of filing itr 2023
I sold a car under my name for 15Lac in FY 22-23. I am now going to file ITR for AY 23-24. I am confused if I should include the money received in my personal bank account for this sale transaction as an income under the head ‘Income from Other Sources’?