The Hidden Taxes of Buying a Car: Insights by Neha Nagar

Thinking about buying a car? It's not just the sticker price you need to worry about. In India, taxes can make your dream car significantly more expensive. Neha Nagar, a renowned finance influencer, breaks down the various taxes involved, illustrating how much extra you'll actually pay when buying a car.

1. The Income Required to Buy a ₹26 Lakh Car

Let's take an example: Sharma ji's son wants to buy a car worth ₹26 lakh, like a Scorpio-N. But to afford it, he needs to earn approximately ₹35 lakh.

Why?

Out of ₹35 lakh, ₹9 lakh will go to the government as income tax.

This leaves just enough to cover the car's cost and associated taxes.

2. Breaking Down the Cost of the Car

The actual price of the car is ₹15 lakh. But here's where the extra costs add up:

• GST on the Car: 28% of the car's price.
• Cess: 22% additional tax on certain car categories.
• GST on Insurance: 18% tax on the car's insurance premium.
• Road Tax: ₹2.5 lakh as a one-time charge for vehicle registration.

In total, these taxes add ₹19 lakh to the cost of the car, meaning you're paying more in taxes than for the car itself!

3. Why Understanding Car Taxes Matters

Taxes are a significant component of any car purchase in India, and understanding them helps you:
Plan Your Budget: Ensure you account for taxes and don't exceed your financial capacity.
Evaluate Alternatives: Consider car models or categories with lower tax burdens.
Appreciate True Costs: Recognize that your investment in a car involves a substantial contribution to government revenue.

4. Tips for Managing Car Purchase Costs

• Choose Wisely: Opt for cars with lower GST and cess rates. Compact and electric vehicles often have reduced tax rates.
• Negotiate Insurance: Compare insurance plans to minimize GST costs.
• Plan for Road Tax: Be prepared for the one-time registration cost by checking the rates in your state.
• Consider Pre-Owned Cars: Pre-owned vehicles generally incur fewer taxes, making them a budget-friendly option.

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As Neha Nagar explains, buying a car in India involves much more than meets the eye. Taxes like GST, cess, and road tax can significantly inflate the cost. Before making a purchase, it's essential to calculate the total expenditure, including taxes, and plan your finances accordingly.