Two-wheelers serve as the lifeline of middle-class families as they are the best form of transportation for daily commuters. The two-wheelers are better than the four-wheelers because they are fuel-efficient and easy to drive.
Despite the easy availability of two-wheelers, affording it with outright cash is a bit difficult. This is where Banks/NBFCs come into the picture as they are capable of providing easy loans. The two-wheeler loans help you to buy the vehicle quickly and in a more affordable manner.
All the Banks/NBFCs in India can provide two-wheeler loans, and they register the two-wheeler as security or collateral. You can also try to opt for a personal loan and purchase your dream bike. However, the interest rate on personal loans might be more than that on a two-wheeler loan.
The process of availing a loan has become much more comfortable now. You can readily check online for various agencies and compare their interest rates, and you can use the online EMI calculator to help determine your EMI amounts. The eligibility criteria like age, address proof, identity proof is also available online.
Additional Read: How to Get a Two Wheeler Loan?
Additionally, You might be able to claim tax exemption on the two-wheeler loan. However, you have to consult your Banks/NBFCs to figure out if you are eligible for claiming tax exemptions.
According to the Income Tax Act in India, you may declare the two-wheeler as a business asset. The interest that will be paid towards the loan can be used as an exemption. It is under Section 80C of the IT Act with a maximum of Rs 1.5 lakh per financial year.
A self-employed person can claim benefits based on their business. The two-wheeler loan tax exemption is available only on the interest component and not on the principal repayment.
You can only use the vehicle for business purposes. The registration has to be done either in the name of the business or the principal business owner to get a tax deduction.
There are three tax advantages when you buy a two-wheeler on loan for business purposes.
As a business owner, if you have availed a Two-wheeler loan, you can claim the interest on the loan as a business expense. The expense will be tax-deductible.
You can claim deductions on transportation costs (fuel and maintenance) as part of business expenses.
You can also claim a deduction on the portion paid for the maintenance of the two-wheeler.
However, you need to keep in mind some points about the tax exemption:
Additional Read: Bajaj Bikes Price List 2021
In short, the Income Tax law in the country classifies two-wheeler loans as a luxury.
Generally, salaried people cannot avail of tax exemptions on two-wheeler loans. However, business owners can apply for a two-wheeler loan as a business expense and apply for tax exemptions. Bike Loan Interest rates are generally much lower than other loans.
However, you should not misuse the tax exemption benefits but rather reduce your tax liability through this option. Also, you will require the loan documents, interest certificate, and invoices for claiming a two-wheeler loan tax exemption.
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