Under the Motors Vehicle Act of 1988, which governs the country\u2019s road regulations, car insurance is a mandatory expense for car owners in India. While the decision to buy a standalone damage or comprehensive motor insurance coverage depends on the car owner\u2019s need and usage, a third-party car insurance policy is a must. A robust car insurance helps protect the car and the owner against any potential damage, theft or loss. However, car insurance premiums can be expensive, especially for a comprehensive motor insurance plan. Consequently, it is only obvious people would want to know if they can get any financial benefits out of the car insurance premium expense, especially in terms of tax relief. When it comes to filing taxes, car owners often wonder whether the car insurance premium is tax deductible.<\/p>\n\n\n\n
In this blog, we will discuss if you can avail of tax relief on the premium you pay for your car insurance and all other necessary information. <\/p>\n\n\n\n
Car insurance, also known as motor insurance, is an agreement between the policyholder or car owner and the insurance company. It provides financial protection to the car owner against any damage, loss or theft of the vehicle. Car insurance<\/strong><\/a> policies in India typically cover three types of risks \u2013 third-party liability, own damage and medical coverage.<\/p>\n\n\n\n In simple terms, the answer to this question is no. The car insurance premium is not tax deductible in India, as it isn\u2019t considered an eligible tax-deductible expense under the Income Tax Act of 1961. <\/p>\n\n\n\n However, a few scenarios exist where one can claim a deduction for the car insurance premium under specific Sections of the Income Tax Act (1961). There are primarily two scenarios where car owners can seek tax benefits for the car insurance premium paid by them. <\/p>\n\n\n\n One should remember that these deductions are only applicable if the car insurance premium is paid by the car owners themselves and not by their employers or any other third party. <\/p>\n\n\n\n Furthermore, you are not eligible for a tax deduction on insurance premiums if you use your car only for personal use. The premium deduction on motor insurance<\/strong><\/a> is granted in full or on a pro-rata basis, depending on whether the vehicle is used exclusively or only occasionally for business or commercial purposes. <\/p>\n\n\n\n It is important to note that tax benefits on car insurance premiums are applicable on own damage cover and comprehensive car insurance policies only. The premium for third-party car insurance, mandatory for all car owners in India, is fixed by the Insurance Regulatory and Development Authority of India (IRDAI). Thus, the third-party car insurance<\/strong><\/a> premium expense is the same for all insurance companies. The premium for third-party car insurance is not tax deductible under any Section of the Income Tax Act (1961). <\/p>\n\n\n\n If your comprehensive car insurance gets used for business-related activities, you can use the premiums for tax advantages. Commercially driven vehicles almost probably have more mileage and run at higher risks. The fact that the premiums are higher for vehicles utilised for business or commercial purposes should not be shocking. For those who are self-employed, the rules are also unchanged. The amount of the premium can be deducted from their taxes if they are using the vehicle for work or business.<\/p>\n\n\n\n The indemnity principle governs insurance policies. Thus, insurance plans are not ways to profit but help make up for losses. When you file a claim, you are not earning money as a policyholder. In other words, the costs of repairs or the loss of the car get covered by your insurance company. The claim amount is not taxable because the insured suffered a loss rather than a gain. However, you are already covered for your losses by your insurance provider. Hence this claim amount is not eligible for tax relief either. <\/p>\n\n\n\n The motor insurance premium is not tax deductible in India if one uses the vehicle for personal use. If you are using your car for commercial purposes, under Section 37(1) of the Income Tax Act, 1961, you can claim the car insurance premium as a business expense. If you have taken a loan to purchase your car, you can also claim the car insurance premium as a deduction under Section 80C of the ITA, 1961. Lastly, as per the outlines of the ITA, third-party car insurance premium is not eligible for any tax deduction. It is mandatory for all car owners in India and provides financial protection to the car owner against any legal liability arising from the damage caused to a third party. <\/p>\n","protected":false},"excerpt":{"rendered":" Under the Motors Vehicle Act of 1988, which governs the country\u2019s road regulations, car insurance is a mandatory expense for car owners in India. While the decision to buy a standalone damage or comprehensive motor insurance coverage depends on the car owner\u2019s need and usage, a third-party car insurance policy is a must. A robust … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":5834,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[250],"tags":[],"class_list":["post-5833","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/posts\/5833"}],"collection":[{"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/comments?post=5833"}],"version-history":[{"count":0,"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/posts\/5833\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.clickfor.net\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/media?parent=5833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/categories?post=5833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.clickfor.net\/wp-json\/wp\/v2\/tags?post=5833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Is car insurance premiumtax deductible in India?<\/strong><\/h2>\n\n\n\n
Is tax relief available for every type of motor insurance?<\/strong><\/h2>\n\n\n\n
Can self-employed individuals’ avail of car insurance tax deductible?<\/strong><\/h2>\n\n\n\n
Are claims made on car insurance policies tax deductible?<\/strong><\/h2>\n\n\n\n
Wrapping Up<\/strong><\/h2>\n\n\n\n