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Section 80EEB – Deduction in respect of interest paid on loan taken for the purchase of electric vehicle

Updated on: 22 Apr, 2022 04:09 PM

This is a newly inserted section in budget 2019 where in government has introduced a tax benefit in case of purchase of electric vehicles. The purpose behind the incentive is to encourage the people of India to shift from Non- Electric vehicle to Electric Vehicles.

What is section 80EEB ?

Under this section, deduction of interest payment on loan taken to purchase Electric Vehicle shall be available whether for person or business purpose. The deduction under this section would be available till the repayment of loan.

Deduction u/s 80EEB is available for 4 wheeled vehicles and also for 2 wheeled vehicles

What is the quantum of deduction available under section 80EEB?

The amount of deduction available under this section is given below :

Actual interest payment on loan or
Rs. 1,50,000/-
(whichever is lower)

Who are eligible to claim deduction u/s 80EEB?

Only individuals are eligible to claim deduction under section 80EEB. One question may come in your mind whether non - resident also cover under this section ? Well, in the absence of specific provision, deduction under section 80EEB will be available to both resident and non-resident individuals.

What are the conditions to claim deduction u/s 80EEB ?

  • Source and period of sanction :The loan must be taken from Financial Institution* and the loan must be sanctioned during the period between 01-April-2019 and 31-March-2023.
  • Purpose : Loan should be taken to purchase electric vehicle*.
  • No deduction under any other provision : The interest allowed under section 80EEB shall not be available under any other section of the Act.
deduction u/s 80EEB

Let’s under the meaning of some important terms used above :

What is the meaning of Financial Institution ?

  • A banking company to which the Banking Regulation Act, 1949 applicable, or
  • Any bank or banking institution referred to in section 51 of that Act
  • Any NBFC taking deposit or
  • A systemically important non-deposit taking non-banking financial company ( which means Non-deposit NBFC having total assets of not less than Rs.500 crore as per the last audited balance sheet and is registered with the RBI.

What is the meaning of Electric Vehicle ?

A vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.

Example : Given below is the information

A taken a loan to purchase electric vehicle
Loan taken during FY 2019-20
Total interest payment during the year Rs. 2,00,000/-
Loan taken from a relative

In the above case, no deduction of interest shall be allowed since loan was taken from the relative.

However, in the above case if loan would have been taken from a financial institution then total deduction under section 80EEB shall be Rs. 1,50,000/-

Frequently Asked Questions

Q- For how many years this deduction shall be available?

Deduction under this section shall be available until repayment of loan provided other conditions satisfied.

Q- Can I claim the interest in my ITR if loan is taken by my wife ?

Since the law is not very clear but as per our opinion if you are making payment of interest then you can claim a deduction under this section.

Q- What evidence do I need to submit to my employer to claim benefit of section 80EEB ?

You must have received an interest certificate from the bank that you can submit. However, provisional interest certificate can also be submitted as evidence to claim deduction.

Q- Can a HUF claim the deduction u/s 80EEB ?

Only individuals can claim the deduction under this section. HUF is not eligible to claim the deduction.

Q- Whether repayment of principal amount of loan is also available as a deduction under section 80EEB?

No, only deduction in respect of interest payment is available under this section.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.