CA explains how to get car loan at 3 percent interest [Video]

Buying a car still a dream for many in India. Most of the people who are buying a car mostly make a small amount as down payment and they rely on car loans for the rest. Once they buy the car, amount is paid back to the bank as installments. Before applying in bank for a loan, we often check for the interest rates and opt for a bank which offers you the lowest interest rates. Here we have a video where a CA explains how one can get a car loan at 3 percent using the taxation laws in India.

The video has been uploaded by Taxation with CA Sahil Jain on their YouTube channel. In this video Sahil Jain explains factors one should consider before taking a car loan. First step is to check expenses. If a person has multiple expenses and he cannot meet all his expenses using his savings, he will either have to avoid that expense or get a loan to fulfill it. He will have to then decide which expense he wants to meet by taking a loan. For that he has to move to the next step. The second step is enquire about loan rates. For all the expenses that he has shorlisted, he should get in touch with banks and financial institutions to check who is offering the lowest rates for very expense.

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Once you have enquired about the loan rates, we move to the third step which is computing effective loan rates. This is where the taxation laws come into the picture. For all the expenses that the person has shortlisted, there are some expenses like education where government has said that the interest amount paid back is tax deductable under section 80E. The interest amount paid during the financial year is allowable as a deduction from taxable income. This actually brings down the actual interest rate of the loan.

Similarly in case of a car, Sahil takes electric cars as an example. If a person is getting a car loan at 7 percent from an institution, under the section 80EEB, he or she can deduct interest of upto Rs 1.5 lakh in a financial year from taxable income. That would bring down the interest rate of the car loan by 40 percent and the effect loan rate would be 2.8 percent. After considering the effective loan rates on all the expenses, the person should go for the expense where the interest rate is the lowest. This is the fourth step one should consder while looking for loans. If you are planning to take loan for an ICE vehicle and want to use it for business, then under 36 (1) (III) all the interest amount that you have been paying for vehicle with no limit is completely tax deductable. Sahil also explains another method in which the person can actually borrow monyey from one of the close family member who has an FD in a bank. Instead of putting the amount as FD in a bank, the person can borrow the money from family and pay back with interest. In this way, he will not have to pay any excess interest rate to the bank which is again saving.

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