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Duty Benefits on an Auto Loan

Duty Benefits on an Auto Loan

You get duty- benefits on prepayment of numerous types of loans. For home loans, we get duty benefit star prepayment under Section 80C and for interest payment under Section 24. still, you get a duty benefit for interest payment under Section 80E of the Income Tax Act, If you have taken an education loan.

Do you get any duty benefits for prepayment of auto loans? This question will intrigue several buyers since the buses are precious and numerous buyers adopt them to fund similar purchases.

The answer is Yes and No. The answer depends on the following 2 aspects

  1. What you do
  2. The type of auto you want to buy

still, also you don’t get any duty benefits on auto loan prepayment unless you’re buying an electric auto If you’re a salaried person. We’ll come to the electric bus latterly.

duty Benefits for tone- Employed or Business proprietor

still, also you have avenues for claiming duty benefits for the purchase of an auto, If you’re a business proprietor or tone-employed and use the auto for business/marketable purposes. However, also you can claim the interest payment as a business expenditure If you have bought the auto for your business. Plus, you can claim deprecation on the auto and set off charges towards energy and conservation.

Deals – Charges = Profit

You pay levies on gains. Any charges will reduce profit and therefore levies. Why similar benefits? Well, the auto is part of the business/ profession and therefore similar charges are treated at par with any other charges incurred to run the business. In this case, interest on auto loans and energy/ conservation are licit charges.

deprecation of capital means is a common norm.

Don’t try to game the system. i.e., use the auto for particular work and show it as business expenditure. These adaptations/ duty benefits are permitted only if you’re using the auto for your business/ profession.

They are many conditions you must meet

  • The auto must be registered in the name of the business or business proprietor or tone-employed person.
  • The auto must be used for only business purposes. Your duty claim can be rejected if the assessing officer believes that the auto has not been used for business/ professional purposes.

duty Benefits on Auto Loan for the Purchase of Electric Car

There are duty benefits on loans to buy electric buses. And these duty benefits are for everyone. Doesn’t count whether you’re salaried or tone-employed or you use the auto for particular or business work. The duty benefit is under Section 80 EEB.
You can take duty benefit( deduction) of over Rs1.5 lacs per annum on interest payment towards an auto loan subject to the following conditions

  • The loan is taken to buy an electric vehicle. Applies to both 2- wheelers and 4- wheelers.
  • The loan is sanctioned between April 1, 2019, and March 31, 2023.
  • The loan must be taken from a bank or a deposit-taking NBFC or a systemically important NBFC.
  • The duty benefit is available only to individuals. The duty benefit under Section 80EEB isn’t available to a HUF, cooperation, or company.
  • The duty-benefit is only for interest payment and not for top prepayment.

To mileage duty benefit under Section 80EEB, there’s no bar on end-use. You can use the auto for both particular and business purposes. If you’re using the electric auto for business and have paid further than Rs1.5 lacs in interest in a time, the excess can be shown as business expenditure.

What Is an Electric Vehicle?

Section 80EEB also provides a description of Electric vehicles.
“ Electric vehicle ” means a vehicle that is powered simply by an electric motor whose traction energy is supplied simply by a traction battery installed in the vehicle and has a similar electric regenerative retardation system, which during retardation provides for the conversion of the vehicle kinetic energy into electrical energy;

Since the vehicle must be powered simply by an electric motor, you won’t get any duty benefit for prepayment of the loan taken to buy a cold-blooded auto that can be powered by both electricity and conventional energy( ICE). The duty benefit isn’t applicable to petrol or diesel buses or indeed to cold-blooded buses.
also, section 80EEB makes no distinction between a 2- wheeler and a 4- wheeler. Hence, the loans taken to buy an electric 2- wheeler will also be eligible for duty benefit.

Can I Claim Input Credit for GST Paid at the Time of Purchase?

Again, this is only applicable to business possessors and professionals. And for all types of buses ( and not just electric buses ). still, you collect GST from your guests and pay GST to your merchandisers, If you run a business.
Your final GST liability = GST collected from guests – GST paid to merchandisers.

Since the auto is going to be used for business purposes, can you use the GST paid during the auto purchase to set off your GST liability? This would be a huge saving if you could do that. Unfortunately, similar set-off is allowed in only veritably specific cases. You can claim GST input credit if the seating installation is further than 13 passengers.

The only exceptions to this rule are when

  • You’re in the business of buying and dealing buses.
  • You run a hacking business and are engaged in the transportation of passengers.
  • You have bought an auto for the driving academy.
    Before claiming auto interest as business expenditure or GST input credit, please consult a Chartered Accountant to check your eligibility.

Editor’s Note If your end thing is to reduce charges or save plutocrats, you can get a loan for an alternate hand auto too.

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