Is A Two Wheeler Loan Eligible For Tax Redemption?

Posted on: Dec 12, 2022 | | Written by:

Is A Two Wheeler Loan Eligible For Tax Redemption?

Published on December 12, 2022. EST READ TIME: 3 minutes

Why are two wheelers popular in India? There are a bunch of reasons which make two wheelers incredibly popular in India. For starters, two wheelers are more affordable to buy. A two wheeler enables you to commute with ease and is cheaper to maintain as well. Even the premium for comprehensive bike insurance is affordable.

In the last couple of years, the cost of two wheelers has gone up by a considerable amount. Primarily due to rising costs and the switch to BSVI engines. And so has the popularity of two wheeler finance.

If you need assistance in buying a two wheeler, you can take the help of two wheeler loans. It is a convenient way of buying a two-wheeler of your dreams and moving ahead in life. Did you know that you can use two wheeler loan for tax reclamation? Here is all that you need to know.

Does your two-wheeler loan qualify for tax reclamation?

Not all two wheeler loans qualify for tax reclamation. Your bike must meet certain criteria for it to be eligible for tax benefits. Only the bikes that are used for business purposes and the bike registered in the name of the business owner can be utilized for tax reclamation. However, to ensure that you receive tax benefits, you must keep all documents of the bike intact, including third party two wheeler insurance.

Conditions under which tax retrieval is possible

If you are looking for tax benefits for two wheeler loans, it is available under Section 80C of the Income Tax Act. However, it applies only to the following conditions.

1. You can claim tax deductions on two wheeler loans if you are a professional, self-employed or business person.

2. It is crucial that the bike is registered in your name to avail of the tax benefits. If the bike is used for business purposes and is not registered in your name, you cannot claim the tax benefits.

3. Some of the expenses related to the maintenance of the bike can also be considered for tax deductions.

4. You can claim tax exemption on the interest that you have paid towards the bike loan as long as you are a business person, freelancer or self-employed and use the bike for business purposes only.

5. You can claim the tax deductions on other expenses related to the bike such as fuel expenses and the cost of transportation and maintenance.

A part of maintaining all the documents for the bike involves its insurance as well. Should you buy two wheeler insurance online, you will always have access to a digital copy of the policy in your mailbox.

How To claim income tax reparation?

Bike owners who wish to claim income tax reparation for their two wheeler loans would need to furnish a couple of documents. For starters, you will need to file ITR-4 for your income taxes. Also, you must include an interest certificate, which is usually provided by the financial institution.

It is essential that you all the receipts, invoices, and any other documents relevant to the tax claims. You will need them while filing your taxes. But it is the decision of the income tax assessment officer to grant you the tax benefits. Based on the proof that you have submitted, they will decide whether the claims are legitimate or not.

Which expenses qualify for tax reparation?

As a taxpayer, you can claim only the following expense for tax reparation on your two wheeler.

1. You can claim expenses related to fuel and maintenance of the bike, provided you maintain records and receipts of the same.

2. You can claim the interest paid towards the two wheeler loan as business expenses and use the amount for tax deductions.

3. You can also claim the partial cost of depreciation on the bike as tax deductions.

It is essential to keep your bike secured by buying two wheeler insurance online. Since the bike is used for business purposes, it is prone to more risks.

Do electric scooters qualify for additional provisions?

The Government of India has been strongly pushing for the adoption of electric vehicles in the past few years. It is in a bid to reduce the carbon footprint of the country and make way for a greener future. Thus, it should not come as a surprise that electric scooters offer additional benefits for tax exemptions. And these apply to two wheelers as well as cars.

Section 80EEB was curated for tax benefits for electric vehicle owners and you can avail of them if you meet the following conditions.

1. You can avail of the tax benefits only if you are an individual taxpayer. If you belong to a company or HUF or are part of a partnership firm, you cannot claim tax benefits.

2. For claiming benefits under this section, you must get an interest certificate from the financing firm along with loan details and keep them handy for filing your taxes.

3. You can avail of tax benefits up to Rs. 1.5 lakhs for a financial year.

4. You must procure the loan to buy the two wheeler from a bank or NBFC.

5. To avail of benefits under this section, the loan amount should have been sanctioned between the window of 1st April 2019 and 31st March 2023.

6. You can avail of the benefits for both business purposes or personal use. For business purposes, you must adhere to other rules as well.

To ensure that your bike is road legal at all times, you must at least have the third party bike insurance. The policy offers protection to your bike against any unforeseen events involving third party entities.

Tax exemptions on a bike bought for personal use

Taxpayers who have bought conventional bikes for personal use, cannot claim any kind of tax exemption. If you have purchased an electric scooter, you can avail of tax benefits as mentioned above. But you can claim tax exemptions on your two wheeler loan only if it is used for business purposes.

Using a personal loan to buy two-wheelers

Using a personal loan to buy two wheelers has quite a few benefits. For starters, the loan formalities of a personal loan are far fewer as compared to a two wheeler loan. Also, a personal loan requires you to pay a minimal down payment and you can receive a higher loan amount as well. As two-wheeler loans usually finance up to 90% of the bike’s cost.

However, you will not qualify for any tax exemptions if you buy a two wheeler with the help of a personal loan. Irrespective of which financing mode you choose, you can buy two wheeler insurance online. It will save you a considerable amount of time and money as well.

Conclusion

You can avail of tax benefits on your two wheeler loan only if you use it for business purposes and the vehicle is registered in your name. You must have all documents in place before you can start with the claim. Buying two wheeler insurance online is the fastest way to secure your bike. Also, comprehensive two wheeler insurance offers much better coverage for your bike as compared to a third party liability policy.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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