Are you applying for a home loan for the first time? Then read this article to learn about the eligibility criteria, required documents, and factors influencing the loan approval process.

Purchasing a vehicle is a milestone in life. From daily commutes to road trips, it brings a lot of convenience. With multiple financing options available, buying a car has become easier. Another good news is that you can also enjoy a car loan tax benefit. This means it will be more affordable for your wallet. Start reading this article to learn about this tax advantage in detail. 

In India, a car loan benefit for salaried employees is not available. But do you own a business? All self-employed individuals can enjoy this deduction.

Let’s discuss how borrowers can enjoy the benefits available with vehicle financing:

We have already told you about the lack of a car loan benefit for salaried employees. This is because vehicles are seen as a luxurious product for indulgence. But you can enjoy deductions on a car used for business purposes. These savings are available if you can show proof of genuine use in the business. 

The interest payment will help you enjoy a car loan tax exemption. You can enjoy deductions on a car used for business purposes and you are allowed to show the same as a business expense. This way, you will be able to claim a car loan tax deduction from the interest payment. 

The status of a depreciating asset can help you enjoy car loan benefits in income tax. Due to this, you will enjoy a deduction of 15% every year. This is great for lowering your tax liability. You should know that depreciation expenses come with a tax exemption facility even when you are purchasing a car without any loans. 

In some situations, people might use the same vehicle for business and personal purposes. In this scenario, you can claim a car loan tax benefit. It requires dividing the depreciation and interest payments according to the use of the car for business and personal purposes. 

You are now aware of the tax advantages associated with a car purchase. Let’s find out how you can go ahead and claim this deduction. 

Start by applying for financing. Look at different lenders for favourable terms. Remember that you need a loan for a commercial vehicle. 

Keep track of your interest payments. Get a certificate from the lender stating this amount. 

You will have to submit the ITR for that financial year. Self-employed individuals should include the car loan interest under business expenses, which helps them claim the exemption. 

While filing your returns, claim the deductions available on your car loan interest. Provide the required details in the appropriate sections of the form.

Gather all the documents you will need to provide to claim the benefits. Keep them handy so that you can easily provide them when the tax authorities ask you for them. 

Let’s find out the documents that you need to provide to enjoy the car loan tax deduction. 

• Submit any identity proof. It can be your PAN card or Aadhaar card. 

• Provide proof of your residence. Utility bills or bank statements are good documents in this category.

• You will also need evidence of car purchase. It can be the registration certificate or invoice. The date and price should be present on the document.

• Car loan statements and agreements are also important. 

• The lender will issue an interest certificate. This provides details about the interest paid on your car loan.

Now you know that tax advantages are available on car loans. This benefit makes the purchase more affordable for you. But salaried individuals can’t enjoy this. Only self-employed people using the funds to buy a car for business purposes can enjoy the deductions. Check out the process to file your claim and provide the necessary paperwork to save more with your car loan tax exemption. Looking to finance your new vehicle? Consider Karnataka Bank for unbeatable terms and conditions!