Car loan tax benefits are available under both the old and new tax regimes, with significant differences in eligibility criteria. According to reports from Mint, self-employed individuals and business owners can claim tax relief when the purchased vehicle is reported as a business expense. However, salaried individuals may not be eligible unless they can prove the purchase serves a business purpose. The benefit structure varies substantially between home loans and car loans, with car loans offering more limited deduction opportunities. Under the new tax regime, individual business expenses like rent or conveyance cannot be claimed, but all Chapter VI-A deductions remain fully available, including Section 80C deductions for PPF, ELSS, LIC, and health insurance, Section 80CCD for NPS contributions, and Section 80G for donations.
Car loan tax benefits include several key deduction categories as reported by Mint. Section 80D deductions are available for self-employed individuals and business owners who use the vehicle for business purposes. Depreciation claims can be made based on the type of car and applicable rates for business assets. Additionally, fuel and maintenance expenses for business use can be deducted from taxable income. Loan interest deductions require detailed documentation through interest certificates from banks, which must be included in Income Tax Return filings as business expenses. Under the new regime, all these deductions remain intact, ensuring taxpayers can still claim the full range of available benefits despite losing individual business expense deductions.
For vehicles used partially for business and personal purposes, tax benefits are limited to business usage only. As reported by Mint, if a car is used 60% for business and 40% for personal purposes, only 60% of expenses can be claimed when filing taxes. This requires detailed records of car usage, fuel expenses, maintenance costs, and other relevant documents to support tax claims. The allocation must be clearly documented to justify business expense claims, with detailed usage records becoming even more crucial under the new tax regime where individual business expenses are no longer deductible.
The Indian government previously offered tax deductions up to ₹1,50,000 on loan interest for electric vehicle purchases under Section 80EEB of the Income Tax Act. According to Mint, this benefit was available for loans sanctioned between April 1, 2019, to March 31, 2023. However, no new or reinstated benefits have been announced for electric vehicle purchases. Importantly, this one-time benefit was only available to salaried taxpayers, with companies, firms, and Hindu Undivided Families (HUF) not eligible for tax benefits.
When purchasing a car for both business and personal use, the loan structure and usage allocation must be carefully planned. As reported by Mint, the 60:40 usage rule significantly impacts tax benefits, making it crucial to maintain detailed records of all vehicle-related expenses. The distinction between home loan and car loan tax benefits highlights the importance of understanding eligibility criteria and documentation requirements for maximum tax optimization. Under the new tax regime, the preservation of Chapter VI-A deductions provides significant relief, as taxpayers can still claim substantial deductions through Section 80C for investments, Section 80D for health insurance, and Section 80CCD for NPS contributions while losing individual business expense deductions.
