Can I Claim Tax Exemption on My Two-Wheeler Loan?

This festive season served as a boon to the Indian automobile industry with the two-wheeler segment noting record demand in recent months. A total of 18.9 lakh units were sold in October 2023, marking a 20% YoY hike. Despite being quite a necessity nowadays, securing a two-wheeler might seem financially challenging. This is where a two-wheeler loan offers you an affordable financial solution to facilitate your daily commute as well as your road trips. 

Tax Exemptions on Two-Wheeler Loans

Is it possible? In short, yes! Apart from featuring flexible downpayment options and affordable EMI terms, a two-wheeler loan also opens the doors to potential tax benefits. But there are certain specifications about the kind of expenses for which you can claim tax exemption on two-wheeler loans. 

You might also like: How to Get Two-wheeler Loan for Electric Scooter

Which Expenses Are Eligible for Tax Deductions?

You can enjoy tax exemption on a bike loan if the vehicle is used for business purposes. As such, you can claim tax benefits on the following – 

1. Interest Charges: 

You can claim tax deductions on the interest you have paid on the two-wheeler loan as a type of business expense. 

2. Transportation Costs: 

You can claim tax deductions on all types of transportation expenses, including the cost of buying fuel and maintenance of the concerned two-wheeler. 

3. Cost of Depreciation: 

You can also claim tax deductions on the sum of money you spend on the upkeep of your two-wheeler. 

Conditions for Claiming Tax Deductions on Two-Wheeler Loans

As per Section 80C of the Income Tax Act of 1961, tax benefits are available on a two-wheeler loan if the following conditions are met – 

• This benefit extends only to small business owners, or self-employed individuals and professionals who are using the bike or scooter for business activities  

• You can claim tax deductions on the interest component of a two-wheeler loan, of up to ₹1.5 Lakhs per financial year 

• To claim tax exemption on a bike loan, the vehicle has to be registered in the name of the owner

• You cannot claim tax deductions if the vehicle is not registered in your name, even if you are using it for business purposes 

Tax Exemption on Two-Wheeler Loan: Things to Remember

You need to keep some additional points in mind before you can claim these tax benefits – 

• You have to file your returns (ITR-4) where you must provide the interest certificates for the loan as issued by the bank or non-banking financial company (NBFC) 

• Make sure that you have all the invoices, receipts, and other papers of the transactions in order to claim tax benefits for these expenses 

• Ultimately the legitimacy of your tax deduction claim on a two-wheeler loan will be decided by the income tax assessing officer, so make sure your vehicle usage aligns with your business needs 

Special Provisions for Electric Two-Wheeler Loans

Section 80EEB of the Income Tax Act offers a noteworthy provision on electric two-wheelers when considering tax exemption on bike loans. This deduction is applicable for electric two-wheelers purchased for both business and personal use. 

As an individual taxpayer, you can claim deductions of up to ₹1.5 Lakhs on the interest payments of a loan taken to purchase an electric vehicle. Tax benefits under Section 80EEB are a unique initiative by the Government of India. These aim to popularise the option and prevalence of electric vehicles in the country and cut down on the use of fossil fuels.  

Condition to Claim Tax Deduction under Section 80EEB

You must follow certain conditions if you want to claim a tax deduction on a two-wheeler loan under Section 80EEB – 

• The deduction limit under Section 80EEB is set at ₹1.5 Lakh in a single year, after which you cannot claim further tax deductions under any other provision of the I-T Act 

• As an individual taxpayer, you can only claim this deduction once and only to buy an electric vehicle 

• This deduction is only available for the first-time purchase of an electric two-wheeler or four-wheeler 

• The tax benefits are exclusive to those taking a loan for the vehicle from a formally recognised financial institution 

• The loan must have been sanctioned between 1st April 2019 and 31st March 2023

Additional Information on Section 80EEB 

These pointers provide a comprehensive guide for individuals seeking tax exemption for a two-wheeler loan under Section 80EEB – 

• If you take a loan for an electric vehicle for business purposes, you can claim a tax rebate on the interest paid, over and above the tax deduction of ₹1.5 Lakhs available under Section 80EEB 

• To qualify for the tax rebate, ensure that the electric vehicle is registered in your name or in the name of the business 

• While filing income tax returns, keep the interest paid certificate and other relevant documents readily available 

Whether you are in the market for a low power scooter or a powerful sports bike, a two-wheeler loan is your ticket to easy financing and additional tax benefits. Today, you can head to Bajaj Markets and apply for a two-wheeler loan online to enjoy hassle-free approval and swift disbursal. Here, you can choose low interest rates starting from 6.49% p.a. and flexible loan tenures up to 4 years. Why wait? Now, funding your two-wheeler is as smooth as riding one!