Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Car loan is exempted for an author

Tax Solve (Assistant) (49 Points)

29 January 2016

Respected Sir,

My Mother and father is an author. They receive Royalty income. If anyone of them purchase a car by car loan or by cash...Can they get any benifit in Income Tax 2016-17? They regulary e filing of ITR 2. Kindly help me with mentioning the proper IT article.

Thanks in advance

Reply
Follow
Share

6 Replies

CA Hariprasad Nayak (Chartered Accountant) (221 Points)
Replied 29 January 2016

Hi,

There are two options to offer the income from Royalty- One offer under the head Income from Profession (Section 28)- Other alternative being to offer under the head income from Other Sources (IFOS). The frequency and intensity of the activities leading to generation of the income determine what head to offer.

Since you have been filing the return in form ITR-2 I believe you are treating the income as IFOS. Expenses incurred (other than capital expenses) wholly exclusively for earning the income is allowed for dedcution u/s 57 in case this option is chosen. Accordingly following expenses are allowed to be claimed-

a. Interest on car loan- 57(iii)

b. Depreciation on car -57 (ii)

c. Car maintenance- 57(iii)

But the onus of proving that such expenses are essential and are incurred wholly and exclusively for earning the income is on the assessee.

Additionally, you may refer to Section 80QQB through which your tax burden may come down substantially, however, subject to certain conditions and limitations.

Hope the above was useful.

Regards,

CA Hariprasad Nayak

Tax Solve (Assistant) (49 Points)
Replied 30 January 2016

Dear Nayak sir ,

Thanks a lot for quick response

Need to ask a question.. My parents are author in writing digest of text books. How they get advantage of 80QQB?

CA Hariprasad Nayak (Chartered Accountant) (221 Points)
Replied 30 January 2016

Hi,

As stated earlier, Section 80QQB is subject to certain limitations and conditions. Since text book authors are outside the scope of Section 80QQB, you can not claim that benefit.

regards,

CA Hariprasad Nayak

Tax Solve (Assistant) (49 Points)
Replied 30 January 2016

Thanks a lot sir....

a. Interest on car loan- 57(iii)

b. Depreciation on car -57 (ii)

c. Car maintenance- 57(iii)

How much can b claim?? pls sir can u describe pls

CA Hariprasad Nayak (Chartered Accountant) (221 Points)
Replied 30 January 2016

Actual amount incurred can be claimed without any upper limit. However, you may at your option disallow a reasonable portion of the expenses (say 25% or 30%) as personal expenses. This will avoid additions in the assessment if any as the AO may take a stand car being used for personal purposes is inevitable.

Also, you need to keep proper documents like invoices for car maintenance.

hope the above clarifies.