Section 80EEB: Tax Benefit on Electric Vehicles

What is Section 80EEB of Income Tax Act?

Under Section 80EEB of Income Tax Act, you can claim tax deduction benefits of up to ₹1.5 lakh on the interest paid towards a loan you have taken specifically to purchase an electric vehicle. However, there are certain terms and conditions pertaining to the loan issuer and electric vehicle that are to be met to claim the 80EEB deduction.

Point to Note

You can claim tax deduction benefits only if the loan is approved between 1 January 2019 and 31 March 2023.

Eligibility Criteria of Section 80EEB of Income Tax Act

You need to meet the following eligibility criteria to claim Section 80EEB deduction:

• The eligible taxpayer has to be an individual, which means HUF, AOP, a Partnership firm, a company, or any other kind of taxpayer are not eligible to claim tax deduction under Section 80EEB
• The loan must be used only to purchase an electric vehicle
• The loan must be taken between 1 April 2019 and 31 March 2023
• Loans from only approved banks and NBFCs would be considered for the rebate

Amount of Deduction under Section 80EEB of the Income Tax Act

Section 80EEB of the Income Tax Act offers a tax deduction benefit of up to ₹1.5 lakh on the interest component of a loan taken to purchase an electric vehicle. 

However, here are a few other key pointers that taxpayers should be aware of:

• This deduction is available only for individual taxpayers
• But if an individual taxpayer takes a loan to purchase an electric vehicle for business purposes, he/she can claim 80EEB tax rebate on the interest paid over and above ₹1.5 lakh
• In doing so, you’ll need to claim the interest paid as a business expense
• The registration of the EV should also be under the name of the owner or business enterprise to claim the tax rebate
• A taxpayer must keep the interest paid certificate and other documents handy while filing income tax returns. 

Also Read

Section 115BAA of Income Tax Act: Features and Eligibility

Section 79 of the Income Tax Act – Latest Amendments

Condition to Claim 80EEB Deduction

If you are claiming a Section 80EEB deduction, these are the conditions that you must follow:

• Section 80EEB deduction limit is set at Rs. 1.5 lakh per annum. One cannot claim further deduction under any provision of the I-T Act
• The deduction is available only once to a taxpayer and for the purpose of purchasing an electric two-wheeler or four-wheeler
• You can claim this deduction benefit only if you are financing the purchase of an electric vehicle for the first time
• You also need to take an auto loan to buy an electric vehicle from a recognised financial institution
• The loan must be sanctioned during the period starting from April 1, 2019, to March 31, 2023

Promotion of Electric Vehicle

The introduction of Section 80EEB of tax deduction benefit is just one of the many initiatives by the government to popularise the adoption of electric vehicles and reduce the dependence on fossil fuels. All these government initiatives, along with growing awareness about climate change and global warming, have contributed towards the rising numbers of EV purchases in the country. India saw 1 lakh electric vehicle purchases for the fifth consecutive month in February 2023, with over 65,000 electric two-wheelers sold, latest official data from Vahan has revealed. 

Final Word

The Section 80EEB tax deduction benefit is a significant contributor towards the growing popularity of electric vehicles among the common people in India. The tax rebate not just helps pave the way for an environmentally sustainable future but also allows eligible taxpayers to maximise their tax savings beyond the traditional exemptions like Section 80C and 80D.  

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