Insurance Premium for vehicle

[Anup Kumar Grover]

Whether, First Car Insurance Premium Paid, on purchase of  Car, whether this amount to current expenditure or it be added to cost of Car? 

[PAWAN KUMAR SHARMA]

First Insurance Premium Paid for purchase of a New car should be Capitalize reason being as per Motor Vehicles Act, every vehicle on  road should be properly insured that's why before taking delivery we have to get the Insurance otherwise you will not be able to get the delivery of the car, means it is direclty linked to get the vehilce on road, hence should be capitalize.

 

[r.rajkumar kumar]

yes .

AI Summary

Vehicle insurance prerequisite capitalisation: first premium treated as part of vehicle cost when required for lawful use on road. The initial insurance premium paid to obtain delivery and lawful use of a newly purchased vehicle is directly linked to bringing the asset into use and therefore should be capitalised as part of the vehicle's cost; recurring premiums after the vehicle is in use remain revenue in character.