Want To Save Between 31-51% On Your New Car Purchase? Here's How You Can Do It

Getting a new car is an important financial decision. More so, after considering the fact that owning and operating a vehicle can be an expensive undertaking. Thus, while buying and selecting a car, we also have to save money as much as we can.

A video explaining how you can save up to 51% on a car purchase has gone viral online.

The video, which was shared on YouTube by a channel called 'Taxation with CA Sahil Jain', details how you can save a ton of money on the purchase of a Rs 47 lakh Toyota Fortuner, or any other car for that matter.

online.cars

In the video, Chartered Accountant (CA) Sahil Jain, explains some specific concepts which could save you over 50% if you are a businessman. But if you are a salaried employee, you could still end up saving over 30% on the price of any vehicle.

Take Input Tax Credit (ITC) while filing GST

Giving an example, Jain starts with the Toyota Fortuner with an on-road price of over Rs 47 lakh. He says that it is better to take ITC or Input Tax Credit (ITC) while filing GST. In essence, it refers to the amount you pay as Tax in advance and could be reduced from the total income at the end of the year.

However, Jain says there is a problem with the ITC. Under section 17(C), the Income Tax department can block ITC for any vehicle that has a seating capacity of fewer than 13 people. But don't get disheartened, as there are exceptions that you can make use of. For example, if you buy the vehicle to supply it further or for commercial transport (pick and drop for employees) or driving school. You can get ITC if you¡¯re exempt for the above reasons. In such cases, you can get ITC.

ITC will come in handy whenever you pay GST. For example, the GST for the output service that you provide (transportation) is Rs 12 lakh for the first month when you buy the new car (Fortuner). You can claim ITC of Rs 5 lakh and pay only Rs 7 lakh on the output instead of Rs 12 lakh. So on Fortuner, you can claim ITC on GST of the car, which comes to Rs 7,28,560.

You can get back the amount paid as TCS (Tax Collected at Source)

In addition to GST, one can save the amount paid as TCS (Tax Collected at Source). In this case (Fortuner), the dealerships pay around Rs 39,280 TCS (Tax Collected at Source). This is one component that the car buyer could get back because TCS has to be paid by the seller and is included in the cost of the car.

On GST and TCS, you can save as much as Rs 7,67,840.

Claim depreciation cost

The remaining cost of the car is Rs 39,67,901. You can claim the depreciation on this cost over the years. If you belong to the highest taxpayer category, which is 42% in India, you can save money over the years by claiming the depreciating value of the car.

So after removing all the taxes and claim amount, a new Toyota Fortuner will cost you about Rs 23 lakhs! But the depreciation amount won't be paid all at once, rather you will have to save the tax on the vehicle over the years.

Screengrab/YouTube

In total, you save about Rs 24,34,359 on the cost of the car. This effectively makes the Fortuner cost Rs 23,01,382, which is less than 50% of the original cost if you do any of the businesses like transportation, supply (dealership) or driving school.

However, if you are not eligible for this and earn above Rs 10 lakh as a salaried employee, you could get a 31% rebate on the taxes in the form of depreciation. Depending on your tax slab, you are capable of saving anywhere between 31% and 51% of any new car you purchase if you follow these simple tax regulations.

For more trending stories, follow us on Telegram.