Income Tax Benefit on Car Lease in India. Should you Do it?
H. Karan Kumar
The COVID-19 pandemic has necessitated social distancing measures, making public transportation a less desirable option. This has led to many individuals considering buying their own car. However, owning an Electric car comes with challenges, such as maintaining it, paying for insurance, and navigating EMIs. Car leasing is an alternative to this, and it is gaining popularity in India. Here’re the EV lease Tax benefits.
Car leasing offers a hassle-free ownership experience where the lessee pays a monthly fee under a contract that typically covers all costs, including maintenance, insurance, etc. There are also several indirect benefits to leasing a car. One of these is the potential for tax savings.
EV Lease Tax Benefits
The tax benefits associated with car/EV leasing in India are available to salaried employees and small business owners. This is because lease rentals can be deducted from your Cost to Company (CTC) before tax, leading to an increase in take-home salary due to the tax savings from your leased car.
Advantages of Leasing a Car
- Tax Savings
Leasing a car can lead to substantial tax savings if you’re a salaried employee or a small business owner. The lease rentals are deducted from your CTC before applying tax.
tax_savings = lease_rentals – tax
- Zero Down Payment
With car leasing, you only have to pay a monthly rent for the car. In addition, many car leasing companies offer discounts and schemes to attract customers.
- Convenience
Car leasing services ensure you don’t worry about maintenance costs, mechanical failures, insurance, and general wear and tear. You can even alter the contract based on your needs and extend the tenure if necessary.
- Hassle-free Return
Once the lease contract ends, you return the car to the leasing company. This saves you the effort and time you’d otherwise spend trying to find a second owner for the car. However, if you wish to keep the car, some leasing companies in India offer a transfer of ownership option.
- Access to Latest Technology:
Leasing allows consumers to access the latest EV models equipped with advanced technology and features without long-term ownership commitment. This ensures that lessees can enjoy the benefits of technological advancements without worrying about obsolescence.
EV at lower Upfront cost with Zecat:
Owning an EV is a pretty hassle; you need to pay the higher upfront costs, charging time is usually high, and then there are servicing issues and other stuff. Zecat understands that, and we provide a complete package of EV solutions for Indian users.
With Zecat, forget the worries of higher upfront costs and own an electric vehicle on monthly payments like your Netflix subscription.
Lease an electric vehicle with Zecat and enjoy endless perks like on-demand fast charger installation, EV consultation, accessories support and much more.
Disadvantages of Car Leasing
Despite the numerous benefits, car leasing also has certain drawbacks. These include a limited number of kilometres per year and a lack of customization options. Leasing is typically recommended if you use the car for three to five years and drive up to 20,000 km yearly.
Another downside is that you don’t typically get the vehicle by the end of the leasing period, but in the case of a loan or buying, you get to own the vehicle and can recover its cost by reselling it.
In conclusion, car leasing in India offers a range of benefits, including tax savings, convenience, and flexibility. Whether you’re a salaried employee or a small business owner, leasing a car can be an intelligent financial decision.
Should you lease an E-Car in India?
This is a subjective question, and one must judge by their own needs and financial conditions. The best way to own an EV is to buy “up-font,” but in terms of leasing or loans, leasing makes more financial sense. Here’s why:
- The most significant benefit of not leasing is that you can own the vehicle and restore the cost by reselling the vehicle.
- But electric vehicles have lower reselling costs due to battery degradation, so it’s best to lease an EV and enjoy all the perks of leasing an EV.
