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Insurance policies have been the most preferred tool to save on income tax. While all are aware of tax benefits on health insurance, a lot of people do not know about tax benefits on car insurance policies. However, tax benefits on car insurance depend upon a few predefined conditions. Read on if you have recently purchased a car insurance plan.
Insurance policies can be divided into two categories general and non-general insurance. Like health insurance, Car insurance also falls under the category of general insurance and allows tax exemption. Tax exemption on car insurance can be claimed if the vehicle is used for business purposes only. Here is a list of when you can and cannot claim tax benefits on your car insurance.
In case you are using the car for business purposes, below are a few sets of conditions.
• Used only for business: The employer needs to confirm that the car is used strictly for business purposes only. The employer would need to submit the bills, driving records, kilometres covered to avail of tax benefits on the car insurance premium.
• Business and personal use: In case the car is used for business purposes as well as personal needs, the tax exemption is calculated based on the cubic capacity of the car in the presence of the car driver.
There are no tax benefits if the car is used for only personal needs. So, it is not a tax saving option for those who are seeking tax benefits from car insurance premiums.
As mentioned earlier, if the car is used for commercial or business purposes, the car insurance premium is tax-deductible.
When cars are used for commercial purpose, it is more prone to damage which increases the cost of the insurance for commercial/business cars. If a self-employed professional is using his own car for commercial purposes, he is also bearing a higher risk of car damage and paying higher insurance. So, if the self-employed professional use the car for commercial purpose, he is entitled to tax exemption on car insurance.
Now that you know the tax benefits on car insurance premium is strictly restricted to business purpose only, you may ponder why you should opt for car insurance.
Although buying third-party insurance is mandatory by law, having own damage insurance is necessary. It provides you with a financial cushion in case of any damage to your own car.
• It provides financial assistance in case of a partial or total loss of your car due to natural or man-made calamity.
• It covers any damage to your car due to accidents
• It provides coverage in case of theft
Furthermore, having a comprehensive car insurance policy provides you dual coverage of both third-party liability and own damage. At Kotak General Insurance, we have a comprehensive car insurance plan Kotak Car Secure that protects your car every time it hits the road.
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