Find out: Tax benefits on depreciation for imported cars Overall benefit Various expenses undertaken for the conduct of a business or profession is allowed as an eligible expenditure for the purpose of tax calculations. What this means is that the business can reduce the amount from the taxable income in arriving at the final figure on which the tax has to be paid. In the case of motor car the allowable figure is the depreciation on the motor car just like other business assets. This benefit is available only for income earned under the head of business or profession. So for example if a salaried individual buys a car and then puts it for various uses then the depreciation on this motor car would not be reduced from the salary income of the individual. The same action undertaken by a businessman or a professional where the use is for business purposes would enable the depreciation to be considered as an allowable expenditure for the business. Adjustments would have to be made if the car is used for both personal as well as business purposes with only the business portion being eligible for the tax benefit. Imported motor car There are two ways in which a motor car can be acquired and one of them is the purchase of the car domestically. This is actually what most people do in the sense that they buy a car from the market of the variety and brand that they would like and then use it for the purpose of their business and other activities. However there is another way to go about the process and this involves importing the motor car from abroad. Sometimes there is a need for the individual to own a specific kind or model of the car and this might not be available in the country so it is imported. The question that arises is whether the depreciation benefits would be available for the imported car also in the same way as a local purchase. Allowable depreciation There are conditions that would have to be fulfilled if the depreciation on imported cars is to be allowed as a deduction in the calculation of the total taxable income. These conditions are applicable for imported cars acquired after March 31, 2001. This means that all the new purchases would qualify under these conditions and hence this would be the first factor in the process. The depreciation would be allowed only if either of the three conditions listed below are fulfilled. The first one is that the imported car is used for the business of running it on hire for tourists. The second condition is that the imported car is used for the purpose of business or profession outside India and the third condition is that it should have been used for the purpose of business or profession in India. These are wide conditions and if wither of them is fulfilled then the benefit of depreciation would be allowed on the imported motor car. This is an important thing because it increases the choice for the business and reduces the restrictions that might be witnessed.
Posted on: Wed, 12 Jun 2013 03:53:01 +0000
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