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Tax Benefits for Car Loan in India
Buying a car through a loan can ease your financial burden, but what about tax savings? Let’s break down when and how you can get tax benefits on a car loan.
✅ Are Car Loan EMIs Tax-Deductible?
For personal use, the answer is no. Unfortunately, salaried individuals who purchase a car for personal use cannot claim tax deductions on the EMI, interest, or principal of a car loan.
💼 Tax Benefits for Self-Employed & Business Owners
If you’re self-employed or run a business, you can claim tax deductions—but only under certain conditions:
1. Car Must Be Used for Business Purposes
- The car should be used exclusively or partially for business.
- Invoices, fuel bills, insurance, and maintenance expenses should be in the business’s name.
2. What Can Be Claimed?
- Interest on Car Loan: Deductible as a business expense under Section 36(1)(iii) of the Income Tax Act.
- Depreciation on the Vehicle: Up to 15% per annum (for regular cars), and 30% for electric vehicles or vehicles used for commercial purposes.
- Running & Maintenance Costs: If used for business, these can be claimed as business expenses.
🧾 Documentation Required
- Car loan statement showing interest paid.
- Proof of business usage (logbook, fuel bills, etc.).
- Registration in the name of the business or proprietor.
⚡ Special Note: Electric Vehicles (EVs)
Under Section 80EEB, individuals (not just business owners) can claim up to ₹1.5 lakh deduction on interest paid on loans taken for electric vehicles—provided:
- The loan is taken between 1st April 2019 to 31st March 2023.
- The vehicle is used for personal or professional purposes.
🔍 Summary Table
| User Type | Eligible for Tax Benefits? | What Can Be Claimed? |
|---|---|---|
| Salaried (Personal Use) | ❌ | None |
| Self-Employed/Business | ✅ | Interest, Depreciation, Maintenance |
| EV Owner (Personal Use) | ✅ (Sec 80EEB) | Interest up to ₹1.5 lakh (conditions apply) |
💡 Pro Tip:
Keep all your documentation intact and consult a tax advisor to ensure proper classification and compliance with IT rules.
