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.
You need to meet the following eligibility criteria to claim Section 80EEB deduction:
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:
If you are claiming a Section 80EEB deduction, these are the conditions that you must follow:
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.
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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Under Section 80EEB of the Income Tax Act, individual taxpayers can claim a deduction of up to Rs. 1.5 lakh on the interest component of a loan taken to purchase an EV. However, each taxpayer can claim this deduction only once for the same or any other assessment year.
Section 80EEB does not fall under section 80C. The latter offers tax deductions and rebates for various investments and expenses, like PPF, ELSS, life insurance premium, home loan repayment, etc. Individuals and HUFs can claim a maximum deduction of Rs. 1.5 lakh. Meanwhile, the former offers a tax deduction of up to Rs. 1.5 lakh on the interest paid on an electric vehicle loan.
Section 80EEB of the Income Tax Act, 1961 allows taxpayers to claim deductions until the full repayment of the loan. Let’s say you take a loan to purchase an electric vehicle for a tenure of 5 years. You can claim a deduction of Rs. 1.5 lakh for each year till you repay the loan.
To encourage individuals to shift to electric vehicles, many Indian state governments offer additional benefits on top of tax deductions. Rajasthan, Karnataka, Andhra Pradesh, Telangana, Madhya Pradesh, Tamil Nadu, Punjab, Uttar Pradesh, and Uttarakhand offer EV owners full exemption from paying road tax.
Ans: Yes, the Indian government offers various subsidies for the purchase of electric vehicles. Under the FAME scheme, electric four-wheelers come with a maximum subsidy of Rs. 1.5 lakh. Moreover, you can get a subsidy of 40% on the purchase price of electric two-wheelers.
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