Moment guide · FY 2026-27

I'm buying a car through my business

Does buying the car in the company's name really save tax?

Sec 32Sec 17(2)Sec Rule 3(2)Sec CGST 17(5)Sec 2(22)(e)Verified 2026-08-09

15% WDV depreciation is the business-car rate under section 32, but buying in a company name does not write off the whole car. Business use must be evidenced, personal use is disallowable or a Rule 3 perquisite, and GST input credit is generally blocked under CGST section 17(5).

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
Depreciation + running costs	15% WDV depreciation, fuel/insurance/driver deductible — to the extent of genuine business use, evidenced by records	Personal-use share is disallowable; s.38 apportionment
Perquisite math (if you're an employee-director)	Company car with personal use = perquisite valued under Rule 3(2) — often ₹1,800-₹3,300/month equivalent, a good deal versus full cost	Perquisite is taxed in your hands via Form 16
GST reality	ITC on motor vehicles (≤13 seats) is BLOCKED u/s 17(5) CGST unless used for resale, transport, or driving school	The 'claim GST back on the car' part of the reel is simply wrong for most businesses
Funding trap	Closely-held company money reaching a 10%+ shareholder as loan/advance for the car = deemed dividend u/s 2(22)(e), taxed at slab	Route matters as much as ownership

The #1 trap

The reel shows depreciation; it never shows the blocked GST credit, the personal-use perquisite, or 2(22)(e) on the funding route — run all four before signing.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF the car has genuine documented business use → claim 15% WDV depreciation and running costs only to that extent.
IF an employee-director has personal use → value the Rule 3(2) perquisite and include it in Form 16.
IF the vehicle is a motor vehicle of up to 13 seats → treat GST ITC as blocked under CGST section 17(5) unless a stated exception applies.
IF company funds reach a 10%+ shareholder as a loan or advance → test section 2(22)(e) deemed dividend and slab taxation.
IF the books show 100% business use without records → disallow the personal-use share under section 38; [VERDICT: compare ownership, use, GST and funding together.]

Worked example

Dev, logistics consultant

Dev’s company buys a car for ₹10,00,000. Assume records support 60% genuine business use and 40% personal use. At the 15% WDV rate, first-year depreciation before apportionment is ₹10,00,000 × 15% = ₹1,50,000. The business-use deduction is ₹1,50,000 × 60% = ₹90,000. The personal-use share is ₹1,50,000 × 40% = ₹60,000 and is not deductible on these facts. The same 60% principle applies to fuel, insurance and driver costs, but the amounts vary case by case. If Dev is an employee-director and personal use is provided, Rule 3(2) perquisite valuation must be added to his Form 16; the range is ₹1,800–₹3,300 per month equivalent, so the annual range is ₹1,800 × 12 = ₹21,600 to ₹3,300 × 12 = ₹39,600, depending on engine size (above or below 1.6L) and whether fuel and driver are also provided. GST ITC on a motor vehicle up to 13 seats is blocked under CGST section 17(5) unless resale, transport or driving-school exceptions apply. If the company instead advances money to a 10%+ shareholder, section 2(22)(e) may create deemed dividend taxed at slab. Dev’s depreciation deduction is therefore ₹90,000 in this simplified example, not ₹1,50,000. He retains logbooks, invoices, board records and perquisite working to support the allocation. Total tax saved or payable then depends on Dev's business tax rate, the perquisite value and the GST amount forgone.

Claims influencers make about this moment

Trap“Buy the car in your company's name and write it all off”

Questions people actually ask

What depreciation rate applies to a business car?

15% WDV is the depreciation rate under section 32 for the business-car example. The deduction is limited to genuine business use and records.

Can a company claim all car expenses?

Section 38 limits depreciation and running-cost deductions to genuine business use. Personal-use amounts are disallowable, while personal use by an employee-director can be a Rule 3 perquisite.

Can I claim GST input credit on a company car?

CGST section 17(5) blocks ITC on motor vehicles up to 13 seats unless used for resale, transport or driving-school purposes.

What is the company-car perquisite range?

₹1,800–₹3,300 per month equivalent is the Rule 3(2) range, depending on the exact vehicle and facility facts. It is taxed through Form 16.

Can a company loan for my car become dividend?

Section 2(22)(e) can treat a company loan or advance as deemed dividend where the recipient is a 10%+ shareholder, subject to the exact funding facts.

Salary vs Dividend Optimiser →Car vs Personal: 5-Year TCO →Or talk to us about your numbers →

Sections: 32, 17(2), Rule 3(2), CGST 17(5), 2(22)(e), 40A(2) · Last verified 2026-08-09 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).