The Indian government introduced Section 80EEB of the Income Tax Act in the 2019 budget to promote environmentally friendly transportation. This provision offers a significant incentive for individuals purchasing electric vehicles by allowing a tax deduction on the interest paid on loans taken for this purpose. The section aims to encourage the adoption of electric vehicles (EVs), which are more sustainable and less polluting than traditional internal combustion engine vehicles.
Section 80EEB of the Income Tax Act, of 1961, provides a tax deduction for interest payments on loans taken to purchase electric vehicles. This section applies to both personal and business use of electric vehicles, encompassing both two-wheelers and four-wheelers. The maximum deduction allowed under this section is ₹1,50,000 per financial year. The deduction can be claimed even before the loan is fully repaid.
Whether you are buying an electric vehicle for personal use or your business, Section 80EEB offers a financial benefit that reduces the overall cost of your loan. If you use the vehicle for business purposes and the loan interest exceeds ₹1,50,000, you can claim the excess amount as a business expense, provided the business or the owner registers the vehicle in their name.
To be eligible for the Section 80EEB deduction, the following criteria must be met:
The maximum deduction allowed under Section 80EEB is ₹1,50,000 per financial year. You can apply this deduction whether you use the electric vehicle for personal or business purposes.
You can claim the interest paid on the loan as a deduction up to the specified limit for personal use.
If you use the vehicle for business purposes and the interest exceeds ₹1,50,000, you can claim the excess as a business expense, provided the business or the owner registers the vehicle in their name.
You must meet the following terms and conditions to claim the deduction under Section 80EEB:
You may also want to know Section 194Q of Income Tax Act
Section 80EEB offers several benefits for individuals and businesses purchasing electric vehicles:
The Indian government has been actively promoting the adoption of electric vehicles through various initiatives, including the FAME II scheme. Launched in 2019, FAME II aims to boost electric mobility by providing financial incentives for the purchase of electric vehicles and developing the necessary infrastructure for electric transportation.
The scheme covers incentives for two-wheelers, three-wheelers, and four-wheelers, focusing on public transportation and commercial fleets. The government has allocated ₹10,000 crore for FAME II, which runs from April 1, 2019, to March 31, 2022.
You may also want to know Section 115BAB of Income Tax Act
Section 80EEB of the Income Tax Act provides a significant incentive for individuals and businesses to invest in electric vehicles by offering a tax deduction on interest payments. This deduction not only reduces the cost of purchasing electric vehicles but also aligns with the government’s goal of promoting sustainable and environmentally friendly transportation. By taking advantage of this deduction, taxpayers can contribute to a cleaner environment while benefiting financially.
Only individual taxpayers are eligible to claim the deduction under Section 80EEB. Other entities like HUFs, firms, and companies are not eligible.
The maximum deduction allowed under Section 80EEB is ₹1,50,000 per financial year.
Yes, the deduction under Section 80EEB can be claimed for both two-wheelers and four-wheelers, provided they are electric vehicles.
Yes, the deduction is available for business use of electric vehicles. If the interest on the loan exceeds ₹1,50,000, the excess can be claimed as a business expense.
The loan must be taken between April 1, 2019, and March 31, 2023, to be eligible for the deduction under Section 80EEB.
No, the interest claimed under Section 80EEB cannot be claimed under any other section of the Income Tax Act.
Get the link to download the App
