Section 80EEB: Eligibility & Deduction Amount
Electric vehicles are better for the environment and an efficient alternative to fuel-run vehicles. The Government of India introduced Section 80EEB to offer tax deductions on the interest paid on the loan availed to purchase an electric vehicle.
If you want to purchase an electric vehicle, this post will help you understand what Section 80EEB is, the tax benefits under this Section, eligibility criteria and conditions required to apply for a tax deduction. Read on!
Section 80EEB of the Income Tax Act
Under section 80EEB of the income tax act, you can claim tax benefits of up to Rs.1.5 lakh (for personal use) on the interest paid towards a loan you have availed 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 this deduction.
Eligibility Criteria and Conditions for Claiming Tax Benefits Under Section 80EEB
Not everyone is eligible to claim tax deduction under section 80EEB. You need to meet the following eligibility criteria first.
- The 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 for 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 legit banks and NBFCs would be considered
Also Read: How To Pay Income Tax Online?
Deduction Amount under Section 80EEB of the Income Tax Act
Section 80EEB of the Income Tax Act offers a tax deduction of up to Rs. 1,50,000 on the interest component of a loan taken to purchase an electric vehicle.
This deduction is available only for individual taxpayers. However, if an individual taxpayer takes a loan to purchase an electric vehicle for business purposes, he/she can claim tax benefits on the interest paid over and beyond Rs.1.5 lakh. However, you need to claim the interest expense as a business expense.
To claim an interest payment above Rs. 1.5 lakh as a business expense, the registration of EV should be under the name of the owner or business enterprise. Point to note – a taxpayer who claims tax deduction under section 80EEB is not eligible to claim the same deduction under any provisions of the Income Tax Act.
A taxpayer must keep the interest paid certificate and other documents handy. While filing your income tax returns, you might have to furnish all these documents.
How to Calculate the Amount of Deduction Under Section 80 EEB
To understand the calculation of the deduction amount under Section 80 EEB, let’s consider the example below.
Mr Sen borrows an amount of Rs. 20 lakh at an interest rate of 10% per annum to purchase an electric bike. The cost of this electric bike was Rs. 22 lakh. He applied for this loan from an NBFC whose sanction date was April 1 2020. The amount was disbursed on May 1 2020.
Therefore, under Section 80 EEB, the interest payable on the loan for purchasing an electric bike will be:
10% of Rs. 20 lakh= Rs. 2 lakh
However, the maximum permissible amount is Rs. 1,50,000. Therefore, Mr Sen will receive a maximum deduction of Rs. 1.5 lakh.
Conditions to Claim Deduction u/s 80EEB
If you are claiming a deduction under Section 80EEB, 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 IT Act.
- The deduction is available only once to a taxpayer and for the purpose of purchasing an electric two-wheeler/four-wheeler.
- You can claim this deduction if you are financing the purchase of an electric vehicle for the first time.
- One needs 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.
Also Read: How To Use Online Income Tax Calculator?
Final Word
Electric vehicles are the future of automobiles. In India, every year a new model of these environment-friendly, cost-effective, and highly efficient vehicles gets launched in the market. To increase electric mobility in India, the government introduced Section 80EEB of the Income Tax Act. The tax saving option under this Section gives an appealing prospect with regard to the purchase of an EV.
FAQs
Ans: 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.
Ans: 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.
Ans: 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.
Ans: 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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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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