Income tax returns (ITR) filing: Is there any tax benefit on Motor insurance? Surprise answer here
Well, customers can claim tax exemption for premium paid on motor insurance as well. However, there is a small catch.
Insurance policies have always been a popular tool to save income tax. There are several policies that can be purchased by the individuals, but all of them can be divided into two simple categories - general and non-general insurance. General policies include health insurance policy, motor insurance policy, travel insurance policy, home insurance policy and commercial insurance policy. Car insurance policy is one of the preferred choices in India but, a lot of people are not sure if the premium paid can be used for tax benefits or not!
Well, customers can claim tax exemption for premium paid on motor insurance as well. However, there is a small catch. This can only be done if the car is being used for business purposes. In case the vehicle is being used for personal use, the customer doesn't qualify to take advantage of a tax deduction on personal car insurance.
Taranpreet Singh, Partner, TASS Advisors LLP., told Zee Business Online that the taxpayer will also have to justify that the insurance expense is being used for business purpose and doesn't involve any personal element.
"Business entities having motor cars as business assets may claim deduction for insurance charges paid. However, the onus will always be on the taxpayer to justify that the asset cost and insurance expenses are used for business purpose and does not involve any personal element," he said.
Singh added that the person should have the proof of the expenditure made towards the insurance premium on motor vehicle so that claim is not denied.
In case the car is being used partially for personal and business use, the income tax deduction for payment of car insurance would be allowed in proportion in which it has been used for business purpose. For example, if the car is being used for 9 hours each day including three hours of personal use, the customer can only claim deduction for six hours.
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The customers need to keep in mind that they maintain proper receipts and records of your car insurance costs, vehicle registration fees along with fuel expenses. These documents would come handy while filing the returns. They are also advised to get in touch with an expert while filing the return for the first time.
What parameters decide premium?
The premium is decided on the basis of driver's age, driving history, make of the vehicle, profession of the person and geographic location.
Why to opt for motor insurance?
Tax benefit is only one of the reasons to opt for motor insurance. According to the data provided by the Ministry of State for Road Transport and Highways in October this year, India accounts for 12.5 per cent (over 1.45 lakh fatalities a year) of global road accidents, with one road accident occurring every four minutes. Motor insurance provides financial backup in case of a mishap.