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Section 80EEB – Deduction in respect of interest paid on loan taken for the purchase of electric vehicle
Section 80EEB was introduced in budget 2019 where the government has introduced a tax benefit in case of purchase of electric vehicles. The purpose behind is incentive is to encourage the people of India to shift from Non- Electric vehicles to Electric Vehicles.
What is section 80EEB?
Under this section, deduction of interest payment on a loan taken to purchase an Electric Vehicle shall be available whether for personal or business purposes. The deduction under this section would be available till the repayment of the loan.
Deduction u/s 80EEB is available for 4-wheeled vehicles and also for 2-wheeled vehicles
Benefits of 80EEB Deduction
- The loan must be obtained from either the bank or a specified NBFC.
- Loan sanctions are applicable for the period between 01/04/2019 and 31/03/2023.
- Only individuals are eligible for deductions in this section, with a maximum cap of Rs. 1.5 lakhs.
- This deduction is specifically designed for the purchase of electric vehicles.
- Exemption from road tax.
- In certain states, including Delhi, a lower registration fee.
- Electric motors have fewer than 20 moving parts, leading to reduced wear and tear.
- No emissions when the vehicle is not fueled, resulting in minimal maintenance.
- GST rate for electric vehicles reduced from 12% to 5%.
- Upon RC renewal after 15 years, a tax will be applied, but electric cars are exempt from the green tax.
The Promotion of Electric Vehicles
The implementation of the tax deduction benefit under Section 80EEB is one of the government initiatives aimed at promoting the widespread adoption of electric vehicles and diminishing reliance on fossil fuels. These governmental efforts, along with increasing awareness of climate change and global warming, have led to a notable surge in electric vehicle purchases within the country. Official data from Vahan indicates that India witnessed 1 lakh electric vehicle acquisitions for the fifth consecutive month in February 2023, with over 65,000 electric two-wheelers sold.
What is the quantum of deduction available under section 80EEB?
A deduction of up to Rs 1,50,000 for interest payments is available under Section 80EEB. Whether an individual taxpayer possesses an electric vehicle for personal or business use, this deduction allows for the claiming of interest paid on the vehicle loan.
For personal use, individuals with electric vehicles can avail themselves of this deduction to offset the interest paid on the vehicle loan. In the case of business use, the deduction under Section 80EEB extends up to Rs 1,50,000, and any interest payments exceeding this amount can be asserted as a business expense. To qualify as a business expense, it is imperative that the vehicle is registered in the name of the owner or the business enterprise.
It is important to note that individuals seeking this deduction should obtain the interest-paid certificate and maintain essential documents, including tax invoices and loan agreements, for reference during the tax return filing process.
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Who is eligible to claim deduction u/s 80EEB?
Only individuals are eligible to claim a deduction under section 80EEB. One question may come to your mind whether non-resident also covered under this section? Well, in the absence of a specific provision, a deduction under section 80EEB will be available to both resident and non-resident individuals.
Did you know - Though the due date has passed for the ITR filing of
FY 2022-23 filing you can still e-file your ITR till 31st March 2020!
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: A loan should be taken to purchase an 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.
Let’s understand 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 is applicable, or
- Any bank or banking institution referred to in section 51 of that Act
- Any NBFC taking a 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 that is powered exclusively by an electric motor whose traction energy is supplied exclusively by a 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 an electric vehicle
|Loan taken during FY 2019-20
|Total interest payment during the year Rs. 2,00,000/-
|Loan was 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 a loan would have been taken from a financial institution then the 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 the loan provided other conditions are satisfied.
Q- Can I claim the interest in my ITR if loan is taken by my wife?
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 the benefit of section 80EEB?
You must have received an interest certificate from the bank that you can submit. However, a 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 the principal amount of the loan is also available as a deduction under section 80EEB?
No, only deduction in respect of interest payment is available under this section.