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  • Category: Tax Planning

    Tax payment for purchase of second hand machine

    Have a query about tax payment procedure for purchase of a second hand machine? Find advice from experts on this page.

    I have purchased second hand machine for commercial purpose for Rs 51000.
    I have taken the deal on stamp paper.
    Is there any tax liability I need to make against my purchase?
    Is there any thing I need to do to make this deal a legal.
    Seller has not given me original bill for the machine I have purchased.
    Experts: do respond.
  • Answers

    4 Answers found.
  • Only on purchase of immovable property that too if value is more than Rs 500000 that time section of TDS will be attract.
    In case of purchase of machine TDS will not attract. For purchase of machinery of valuing more than 51000 do not attract TDS . You can given full payment of 500000 without deducting TDS.

  • First hand or second hand if you have got the receipt for any purchase made for professional reasons, then it is a legal deal. Make sure the taxes for transaction are properly cut from the sellers side too. Here I am referring to the sales tax and vat prices that includes in your final pricing. You have to use that quote while putting your taxed depreciating asset during the taxation. When you are purchasing a machine be it second hand or the first hand then based on the "depreciation assets" under business, you can register them. This helps you with the tax cut under the professional expenses if you are professional and business.

  • Thank you very much for your replies.
    First, let me admit that I am not from commerce/finance background. Unfortunately I couldn't understand any way forward from both of the above replies. To add further in my case that neither the person from whom I purchased the machine nor my business is registered any where in any way.

    But as I am aiming to register my business as a company in near future so I am interested in paperwork and tax formalities against my asset purchase (machines).

    Please guide what I should do. Please help me i.e. where and how to pay tax (because its me only who can pay tax amount if there is any tax liability on the transaction of machine I purchased). Please also suggest if there is no tax liability against my purchase, then what should I do so that I can claim the worth price of my machine purchased.

  • First of all let's clear your first doubt about tax, as you mentioned that you are not from commerce background and do not have much clarity.
    There will not be any tax liability on purchase of second hand machine.

    As you said that you will set up a business and use the machine in future in your business, then in such case you can use the same in your business and claim it's worth in your business.
    To do so you need to show the machine purchase in your books as an asset and claim depreciation every year @15% from year one. Since you are not very much acquainted with commerce terminology you can take help of some accountant or a practicing CA.
    You will have to maintain books of accounts for such claims of expenses. As you have already mentioned that the seller has not provided you any bill for the machine purchased hence you will have to arrange for a bill/invoice of the value of machine or get a agreement drafted for such purchase.
    Although you have made one mistake of purchasing the machine before even registering a company or any other entity, which you should have done before purchase of machine and after the company/entity was registered the machine should have been purchased out of funds of company and in name of company only.
    Anyway there are always solutions to all problems and it can be managed but you will have to visit a practicing CA for the same and he will help you out for a nominal fees.

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