Insurance policies can be prudent financial purchases. In return for premiums, they help you save a good amount of money in times of emergencies. Another benefit that some insurance policies offer is regarding tax. Health insurance premiums, for instance, can help you claim tax deductions under Section 80D of the Income Tax Act, 1961.
This might cause some to wonder whether securing their car with a car insurance policy also helps in terms of tax. Four-wheeler insurance policies can indeed help claim tax deductions, but only under certain strict conditions. Let’s get to know more.
Understanding tax deductions on car insurance
Whether you can claim tax benefits on your car insurance premium depends on how you use the car.
- For cars meant for personal use
If you have insured a car that you are using solely for personal uses, then the premiums paid for such a comprehensive or thirdparty car insurance policy cannot be claimed as deductions. This rule is applicable even if you are using a company car to travel to work. *
- For cars meant for business use
Tax deductions can be claimed against a multiple set of expenses, including car insurance premiums, if the car is meant for business use. To be eligible for this deduction, you must ensure that you have a certificate verifying the business uses of the vehicle. *
If such a vehicle is being used for both personal and business uses, the tax benefit is calculated on the basis of the business use of the vehicle only. This rule is applicable for self-employed individuals as well, who may use their four-wheeler variously, including for transportation of goods and services.
However, one must inform their car insurance provider that they mean to use the cars for non-personal uses. Failure to do so can lead to issues in the event of a claim. Cars used for business purposes tend to carry higher risks. So, they may incur more premiums. Hence, the insurer needs to be informed of this matter. * Standard T&C Apply
Can you gain tax exemption on the claim amount?
One cannot receive any tax exemptions on the car insurance claim amount because this amount is not considered a source of income, and hence, is not taxable in the first place. The claim amount is the compensation you receive from the insurer for suffering a loss due to damages to your car. There is no tax element involved in this process. * Standard T&C Apply
Car insurance is a necessary purchase. Here’s why.
Buying car insurance for your personal use may not make you eligible for tax deductions. But it helps you in a myriad of ways, such as:
- Financial protection from third-party losses (third-party car insurance coverage is mandatory as per the law)
- Financial protection from theft
- Financial protection from natural and man-made disasters
- Additional protection in the form of add-ons, such as zero depreciation cover, engine protect cover, emergency assistance, and so on
- Cashless repair services at numerous garages across the country
* Standard T&C Apply
If you think the premium of your car policy may be higher, you can use a car insurance calculator to adjust the variables and reach a more affordable estimate.
Tax benefits are subject to amendments in tax laws. Please consult a tax professional before making any major decisions.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.