Jaspreet Singh, 28, had claimed that he was racially attacked in Melbourne after he reportedly burnt himself while torching his car to make an insurance claim.

During a court hearing, it was found that Jaspreet Singh who had said that he was doused with petrol and set alight by four men after he parked his car near his home early January, was planning to claim insurance money to fund a holiday to India.

Police found he had suffered the burns while trying to torch his Ford sedan, Melbourne Magistrates Court heard today.

Singh had pleaded guilty to criminal damage with intent to gain through arson, attempting to obtain property by deception and making a false report to police.

Senior constable Luke Devlin told the court that Singh had failed "to consider atmospheric conditions... (and) a vapour explosion occurred".

Deputy chief magistrate Felicity Broughton imposed an aggregate jail term of eight months suspended for two years on Singh but said if he had not pleaded guilty, Singh would have been jailed for 15 months.

She said Singh's behaviour was clearly a planned and premeditated enterprise. Singh had suffered burns to his arms, feet, neck, face and scalp.

According to 'The Age', police official Paul McClure said Singh was in dire financial circumstances after the collapse of a business, and was going to use the burnt car to make an insurance claim.

He said the events could have some bearing on Singh's wife who is in Australia on a student visa and hopes to apply for permanent residency when the visa expired.

Broughton said for Singh to have claimed that he was a victim of a racist attack at a time when tensions between Australia and India was a cynical action.

The incident occurred in January this year when the attacks on Indians had created a crisis of sorts, with the Indian government taking up the issue strongly with Australia.