Rupee Calm As Rumours Subside

Thinking of buying a car? There are three ways of going about it:

(a) Buy on hire purchase;

(b) Lease the equipment;

(c) Apply one's own funds;

An individual who is not engaged in any business or profession does not have any tax breaks whatsoever. Obviously, he would do well by taking option c and eliminating the cost of borrowing. However, thanks to liberalisation, car finance falls into a special category.

Today, many manufacturers are offering cheap finance, so cheap that the individual would do well to buy the car on hire-purchase, and pay the price in installments, even if he can afford to buy it outright. He should do so if he finds that he can invest the money thus saved into avenues that give higher returns than the cost of hire purchase.

The only difference between hire-purchase and an outright purchase is that the buyer pays predetermined periodical installments. The title to the asset rests wholly with the purchaser and all the associated burden of protecting and preserving it. Therefore, the purchaser inherits the right to claim expenses such as insurance, repairs, road taxes, including the interest paid to continue to hold the title to the asset.

Can the buyer claim depreciation on the asset even when, under the civil law, the ownership does not pass to the hire-purchaser until the last installment is paid? Well, luckily, circular (no 9) issued by the Central Board of Direct Taxes, way back on March 23, 1943, allows