All You Need To Know About Tax Exemption on Car Insurance Policy
Now and then, we look for ways to save on income tax and usually end up buying insurance policies. In India, general and life insurance companies are the two categories under which different insurance products are offered. When it comes to life and health insurance policies, we first consider the tax advantages of the plans at the time of purchase. But here’s a secret for you: a policyholder can avail themselves of tax benefits on car insurance policies under a few pre-defined situations. Do you not know much about this? Don’t worry, we’ve got you covered! Continue reading to find out more about tax exemptions on car insurance policies.
When Can You Claim Tax Benefits on Your Car Insurance?
You can claim tax benefits if you are using your car for a commercial purpose under the following circumstances:
- If the car is strictly used for business purposes, the employer must attest that the car is only used for work-related activities. In order to avail of tax exemption on car insurance premiums, an employer would need to submit the bills, driving records, and travelling history (kilometres covered).
- If a vehicle is driven for both business and personal reasons, the tax exemption is determined based on the vehicle’s cubic capacity.
Can self-employers claim tax benefits from car insurance premiums?
When cars are used for business purposes, they are more vulnerable to damage, which raises the cost of commercial car insurance. If a self-employed professional drives his own car for business purposes, he runs a huge risk of car damage and must pay more for insurance. As a result, he is eligible for a tax exemption on car insurance.
What Documents Are Required to Claim Tax Exemption?
Listed below are the documents that you need to submit to claim tax benefits on your car insurance policy.
- Original copy of the invoice for the car
- Copy of the registration fee paid for the car
- Invoice of your car insurance policy
- Records of the vehicle’s repairs and maintenance
- Evidence of fuel bills
How to Claim Tax Benefits on Car Insurance Policy?
Here are the steps you can follow to get a refund for the tax paid towards the car insurance.
- You must get your records audited by a chartered accountant if your company’s annual revenue exceeds Rs. 1 crore.
- After that, you must complete your tax filing. Either you can do it yourself or you can have a tax consultant’s assistance. You can include the car insurance premium invoice and any other necessary supporting documentation when you file your income taxes in order to claim tax deductions.
- Refunds will be processed once the Income Tax Department has confirmed your documents and is satisfied with the use of the car.
Most people don’t know about tax redemption under car insurance policies. An individual can only enjoy this benefit in the case of business or commercial cars. For instance, you cannot claim tax benefits on car insurance plans for personal vehicles.