Ask Mint Money | If car used for business, you can claim deduction on loan interest

Ask Mint Money | If car used for business, you can claim deduction on loan interest

I have purchased a car and the equated monthly instalment (EMI) is Rs5,760. How much will be the tax deduction?

—A. Ramesh Prathaban

There is no deduction available on repayment of interest on a loan taken for acquiring a motor car for personal use.

However, in case the car is owned and used for business purposes, you shall be entitled to claim the entire interest amount as deduction against business income. Additionally, you shall be entitled to claim depreciation on the cost of the car (excluding interest).

I have been investing in Public Provident Fund (PPF) since the last three years. I want to know the tax implications on the maturity amount.

—Kailash Gupta

The amount received at the time of maturity from a PPF shall be exempt from tax in accordance with the provisions of the Income-tax Act. Under the current EEE (exempt, exempt, exempt) tax regime for PPF, the account is exempt at all the three stages. First, when you deposit in the account, you get tax deduction under section 80C. Second, at the time of accumulation of interest in your PPF account, you don’t have to pay any tax. Third, at the time of maturity (presumably 15 years from the commencement of the subscription) when you withdraw your money, the proceeds are tax-exempt.

Similar provisions have been proposed for PPF under the Direct Taxes Code (DTC) as well.

I bought a unit-linked insurance plan (Ulip) last year. I want to know if I would get tax benefits when DTC is implemented.

—Ashish Sen

Currently, the amount invested in Ulips is available as deduction under section 80C up to Rs1 lakh. However, under the proposed DTC (effective 1 April 2012), it seems that Ulips are not categorically a part of the deduction list. It needs to be seen whether Ulips or other insurance policies would get covered in the near future.

My child is an actor. How do I prevent clubbing my child’s income with my income?

—Mohit Sharma

As per section 64(1A) of the Act, any income accruing or arising to a minor child shall be clubbed in the hands of the parent concerned. However, this may not apply if such income accrues or arises as a result of the following factors:

•Manual work done by the minor child

•Activity involving application of skill, talent or specialized knowledge and experience

Thus, income of a minor child accruing or arising by way of acting (involving skill and talent) shall not be clubbed with the income of the parent concerned and shall be independently taxable in the hands of the minor child.

Nitin Baijal, director, BMR Advisors

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