InvestorQ : Why does a Home Loan EMI or Educational Loan offer tax benefit but the same is not true for a Auto Loan?
Tushar Jambhekar made post

Why does a Home Loan EMI or Educational Loan offer tax benefit but the same is not true for a Auto Loan?

Answer
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Nikita Damle answered.
1 year ago


One can avail the tax benefits in case of a home loan with respect to the principal and interest paid, both. Interest paid on educational loan helps claim deduction under Section 80E of Income Tax. These tax benefits on Home Loan or Educational Loan is given as home and education is the basic human needs. Whereas, an auto loan is taken to buy a vehicle like a car, SUV, or motorcycle which does not categories as basic need or amenities. Instead, these fall under luxury and so there is no tax benefit for an auto loan.

If you are buying a car or any other automobile for your business purposes and you are a self-employed person, then you can claim the interest you pay as business expenses. It means that the amount of interest paid in a year can be deducted from your taxable income. So if you have paid an interest amount of Rs. 3 lakh and your income is 12 Lakh, then you are liable to pay a tax of Rs 9 lakh only.

It should be understood that although taxation is the primary source of revenue generation for the government, it is also a way to channelize the funds from the rich to the needy. As a result, some investment and loan are given tax benefits.