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Is it possible to save tax by buying car for salaried pe

abhishek (Staff) (81 Points)

07 April 2011

Hi

I have two sources of income, my salary from job.
And the main component is the interest on my investments, due to which I have to pay heavy amount of taxes every year.

I would like to know if I could save taxes on depreciation on buying a new car.
Is there any way I can save taxes on interest income.

Thanks
Abhishek

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11 Replies

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 07 April 2011

Hi Abhishek

U cant clain Deperciation for ur New Car. Car can be deperciated only when ur using it in a business or in ur profession. So Salaried person cant claim Depreciation.

To avoid tax u can invest in Mutual Funds, NSC, Infrastructure Bonds, 5-Yr bank fixed deposits, 5-Yr post office time deposit, NABARD rural bonds etc but invest in those after consulting an Auditor for ur betterment.

Thanks

R Shriram

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abhishek (Staff) (81 Points)
Replied 07 April 2011

Thanks Shriram, but i want to save tax apart from 80CC deduction, so is there any way to show a business along with salary to save tax by buying a car.

Athmaram (Articled Assistant) (170 Points)
Replied 07 April 2011

Originally posted by : abhishek
	Thanks Shriram, but i want to save tax apart from 80CC deduction, so is there any way to show a business along with salary to save tax by buying a car.

Yes Mr. Abhishek you create a business say xx investments & explain its scope as investment in bonds, shares & deposits so on and so of. Against this business purchase a car & claim 15% Depn per annum as expenses and can reduce tax.

Provided change all investments to the entities name which will make ur idea so clear.

Thanks & Regards

Ram.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 07 April 2011

u can show rental of car, from which u can claim depriciation / maintainance of car/ driver expenses/ interest on loan taken for car ( if any) but remember not to exceed 10L otherwise u will face music of service tax.

1 Like

abhishek (Staff) (81 Points)
Replied 09 April 2011

Thanks Mr US Sharma, can you please explain me a bit more, do u mean that I need to show a business along with job to use benefit of depriciation, and will I need to transfer investments in the name of business, because this will be a bit difficult thing.

And I want to go by way that is not too risky, but too want to save tax, as have to pay tax from my interest income.

Thanks

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 09 April 2011

for business of renting car u dont have to do any business seperately, u just have to own a car, produce it on rental basis, get the rent, deduct the expense and book the balance in your business profit, your personal name and PAN is enough. if your employer is not a travel agent then there is also no clause of compltance with employer.

abhishek (Staff) (81 Points)
Replied 10 April 2011

is it that i can just show car is for purpose of renting, but no profit, then only i will be able to show loss and save on taxes. Though I can buy car by direct payment, so what will be more beneficial taking loan or direct payment if I am using this option.

As I came to know that one can show any business loss and save from tax incase you have ineterest income. - Is this right?

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 10 April 2011

usually car is personal effect in perasonal hands, and no depriciation or interest benefit is available to individual assesee,

as u have asked to avail the depriciation, so i have pointed out the suitable way to get this,

any business is done for cash profit, but with book adjustments like depriciation, interest burden, the effect get converted to loss sometimes. whereas we can not say that we have done business for NO PROFIT.

but if you are opting for business loss, then i regret to comment further on this issue.

CA Shiv (Business Controller) (2987 Points)
Replied 11 April 2011

Abhishek,

there is no way you can claim depreciation. If you show it in business, than you have to pay 33.66% of IT on that amount for that business and depreciation of 10% for your car.
So think wisely what is benefit for you. Only for depreciation you cannot open a new company.

Also you have mentioned that you want to have deduction other than 80C. so go for HRA also if not calculated for salary.