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Car purchase in Partnership firm's name

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Natasha S

24 Points Posted on 17 September 2023

Hi,

I have a partnership firm (not LLP) in Bangalore with me and my spouse as the two partners. We plan to purchase a car (say for 15 lakhs) under the firm's name.

Now, the firm's account has around 5 lakhs. We do not intend to take a car loan. Can each partner loan 5 lakhs (total 10 lakhs) to the firm and ensure the car is purchased under it's name so that we can show that as an asset and benefit from depreciation, insurance, maintenance costs etc?

Also, how much tax can be saved from the business profits (including car purchases, depreciation, etc) if the above holds good?

Please advise.

Replies (3)

Quick Summary

This discussion explores the feasibility of purchasing a car under a partnership firm's name, rather than in individual partners' names. The partners propose loaning funds to the firm to cover the car's cost, enabling the firm to claim it as an asset and benefit from depreciation, insurance, and maintenance expenses. The conversation also touches upon potential tax savings on existing profits and future earnings through loan repayments.

Suresh Kumar

Account

298 Points Posted on 17 September 2023

Yes. above transactions can be done. This is within the laws.

RAJA P M

"Do the Right Thing...!!!"

77792 Points Posted on 17 September 2023

Yes, You can show the car as asset in the firm and Claim depreciation. Also You can book expenses like Insurance, Maintenance and Fuel...

Natasha S

24 Points Posted on 17 September 2023

Thanks for the responses.

Do we also get to save 30% tax on the existing 5 lakhs currently in the firm's account (these are the profits earned this year) from the above car purchase? Also, can future profits upto 15 lakhs be made tax free as that can be shown as loan repayment to the partners?

Newbie here, so please excuse if the questions are silly.