A number of queries related to tax exemptions rise especially when subject is paying a hefty part of its earnings as new car loan EMI. Following pointers may help in sorting out some of those concerns:
-
If you are a business person or a professional who is declaring his realized gains via business or professional proceeds, then an interest pain over auto loan and its depreciation can be utilized in getting tax exemptions. The same is not applicable in case of salaried individuals.
-
There are specific categories mentioned by auto experts for claiming tax-deductible interest over car loans. Individuals paying home loan, business loan, student loan, or any other kind of personal loan, may get tax exemption under certain conditions.
-
But anyone who is claiming a deduction over car taxation against other pending loan, must know that their property will be the first in line of fire in case of inability to payment. For e.g. , if you are securing a deduction on car loan EMI against a home loan, then your home will be the first thing to get affected when you fail to pay your auto loan EMIs.
-
Claiming a tax deduction over auto loan is not without risks, therefore, make a careful consideration before you jump over it.
-
It is also important to have a good credit score when you are looking for tax deductions. People with bad credit history, often end up paying higher interest rates over minimal auto loans.
-
It is worth noting that people seeking deduction over their income tax over payment of car loans often get into radar of audit units. So, be ready to face an uninvited audit in case you are or have applied for auto loan tax deduction.
-
Also, if the authorities find you ineligible for tax deduction, you may face extra penalties and fine for using wrong means for income tax deduction. Therefore, be careful before you apply any such measure.
