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Insurance expenses car purchase

Surinder (Assistant) (341 Points)

12 July 2021

Dear sir

A person purchase Car for business purpose. person have proprietorship business. At the time of Purchase of car, Car company doing insurance and RC ( registration certificate) now question is whether claim this insurance and RC amount as Expenses in PNL or Capitalized

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5 Replies

Deepa B (Practicing Chartered Accountant ) (573 Points)
Replied 12 July 2021

The first insurance premium and RC expenses have to be capitalized. But the subsequent annual insurance premiums have to be expensed off.

1 Like

CMA Poornima Madhava (CMA) (13097 Points)
Replied 12 July 2021

These have to be capitalized as part of cost of the car.

1 Like

Balamurali Unnithan MS (STUDENT) (1631 Points)
Replied 14 July 2021

Doing both methods, either capitalise the cost only or can capitalise the entire amount incurred.

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (3303 Points)
Replied 17 July 2021

since insurance and registration charges are revenue expenses in nature. so it cannot be capitalised. Debit in P & L account.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 17 July 2021

This registration fee can bbe treated as a cost necessary for the asset to work as intended by the management. So include it in the cost of vehicle. Similarly, Insurance has to be capitalised, the deposit part, and expense any premiums on it. If it is only fee/premiums type, expense it monthly/annually as it is tax allowable. This is better tax planning,