I started a Private limited company (Oct 2016). I want to buy a car on my company name. As my company is new I will not get loan on my company name to buy car. If I loan money from my friends on my company name, can I use it to buy the car with full cash and show as expenses and the interest I am paying to my friends also as expense. Any cap limit for this. Or, If I have 10 lakhs left after expenses from my business and I use that 10 lakhs money to buy a car in cash, can I show that 10 lakhs as expense. Any cap limit for this. Or If I get the loan after waiting to build my company credit score, Many blogs telling taking loan is beneficial in terms of tax but anyway we pay interest to bank for many years. Could not understand this option. Please explain me how this works and any better options for me.
Hiii
1. You can't take loan from relatives it's not allowed as per Company Act
2. You can buy from your Companies income but total value of car is not your exp.
You can claim depreciation only as exp.
3. intt. You can claim exp business expense and in company tax rate is 30.90 %
4. try to get loan on company name with personal guarantee of you by this your Companies Cibil score make
Dear Sir,
First thing, you cannot accept loan more than 20000 in cash. Hence, this option is not feasible.
However you can take loan from your friends through cheque and buy car. You can take deduction of interest paid to your friends. Further, you can claim depreciation on car as your expense year on year. Entire cost of car will not be deducted in current year.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Whe buy the car in loan, example say we paid 3 lakhs money in the beginning and remaining 7 lakhs taken as loan, say we paid around 1 lakh as loan repayment the same year, totally 4 lakhs for the car. This 4 lakhs will be considered as expense or only 1 lakh which paid as loan emi will be considered as expense Also, Say, my company is a taxi renting company, My main investment would be to buy the car. then also this investment will not cover as expense 100%.
As I said in last reply
You can claim as exp. Depreciation on cost (whether loan or your own source)
And interest portion in your emi
4 lac in your example is not ur exp.
3 lac you pay for creating a asset which u use in coming years for ur business
1 lac u pay and reduce ur loan liability thus this is not ur exp on intt. Portion in 1 lac is exp.
Thank you for the update. What I understood is only the interest component for car loan will be considered as expense and the principle is not considered as asset, Am I right? If I go for car leasing option and say example I pay 30000 monthly. Will it considered as expense.
Right
Interest is exp
N car is asset
Yes you can go for leasing option n pay monthly payments as hire charges
But plz don't forgot to deduct TDS @2% on hire charges under section 194I
one last thing
Before taking any decision must compare both proposals in comparative analysis
Right. Apart from interest, you will also be eligible to claim depreciation which is 15% of the book value.
In case of car leasing option entire 30k cab be deducted.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Hello Sir,
You cannot take a loan from your friend in the name of your Company as it is against Companies Act, 2013. The penalties are way to high. So it is advised not to indulge into any such activity.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
hope your query is answered . For more info mail at modani005@gmail.com
