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Ashok K Gupta (Assistant Registrar)     12 June 2013

Car loan settlement


I am a salaried govt employee with an annual income of Rs. 5.50 lakhs. 

Recently I have taken a loan of Rs. 7.50 from SBI for purchase of car at 10.45% for 7 years. EMI for repayment is Rs. 12730.

I am wondering how this will be going to affect my tax-liability in case I repay whole of the loan amount in the year to save more interest.

Please enlighten.


Ashok K Gupta


 7 Replies

Gaurav Gulati (CA)     12 June 2013

No tax benefit will be available for salaried assessee on early repayment of car loan to SBI

Ashok K Gupta (Assistant Registrar)     12 June 2013


Thanks for your time and value comments.

Since I am repaying all the money in a year or so, would this repayment be treated as additional income by the Income-Tax Dept.

What would be my Chargeable Income? If it would be only Rs. 5.50 lakhs (salay income) or it would also include repayment of Rs. 7.50 (If IT may ask for production of evidence for the source of these repayment money)?

Please enlighten.


Ashok K Gupta


U will have to show the source of additional income from which U propose to repay the loan. In case U have your savings out of your salaried income , it will not be treated otherwise.

Ashok K Gupta (Assistant Registrar)     17 June 2013

Many thanks for your valued time and advice


Vineet (Director)     24 June 2013

Prepayment of car loan is issue with Income Tax only if, source of repayment is unexplained. In your case, car value is much more than your annual income, so there are likely chances of case coming under scrutiny.


If you have explained sources such as savings, genuine gifts, sale proceeds of declared assets, genuine friendly loans etc for repayment of car loan, no need to worry.

Ashok K Gupta (Assistant Registrar)     24 June 2013

Extremely thankful to you for your valued reply.

If an mutual agreement of friends lending me money for repayment would help me convincing IT Dept.

Once again tender of thanks to you for your valued times.

Vineet (Director)     25 June 2013

Your friends can give you loan but the loan should be genuine. In such matters authorities examine three things; Identity of lender, Genuineness of transaction and creditworthines of lenders. So If the lender is identifiable with credible evidence, loan has been received by cheque from account of lender and the lender is worth advancing such loan and not merely entry operator...not an issue.

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