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In a bid to promote the adoption of electric vehicles (EVs) and combat climate change, the Indian government introduced Section 80EEB in the 2019 budget. This initiative incentivizes individuals by offering tax deductions on the interest paid for loans used to purchase EVs.
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.
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.
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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Only individuals are eligible to claim a deduction under section 80EEB. One question may come to your mind whether non-residents are 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.
Let’s understand the meaning of some important terms used above :
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 an electric regenerative braking system, which provides for the conversion of vehicle kinetic energy into electrical energy during braking.
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 the 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/-
Deduction under this section shall be available until repayment of the loan, provided other conditions are satisfied.
If you are making a payment of interest, then you can claim a deduction under this section.
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.
Only individuals can claim the deduction under this section. HUF is not eligible to claim the deduction.
No, only deductions in respect to interest payments are available under this section.
