What is Section 80EEB?

Section 80EEB of the Income Tax Act, 1961 focuses on the deduction of interest payment on loans obtained to buy an electric vehicle for personal or business purposes. Moreover, it is available for four-wheelers as well as two-wheelers. You can avail Section 80EEB deduction until the repayment of the loan.

What is the Section 80EEB Deduction Amount?

Section 80EEB allows a deduction of up to ₹1,50,000. As an assessee, you can buy an electric vehicle for personal or business use. In case you have purchased an EV on loan for business purposes and the interest amount exceeds ₹1,50,000, you can include the excess amount under business expenses. However, to do so, ensure that the vehicle is registered under the name of the enterprise or business owner.

 

Note: You must obtain the interest paid certificate and keep documents like the tax invoice and loan documents handy while filing the return.

 

Section 80EEB Eligibility

Section 80EEB deduction applies to individuals only. However, if you are an individual who runs a business (proprietorship firm) and the vehicle is utilised for business purposes, you are eligible for deductions under this section. HUFs, partnership firms, AOPs, companies, etc. cannot claim deductions under Section 80EEB.

 

So, for instance, you received a loan to purchase an electric bike on June 10, 2021. You purchased this vehicle to deliver home-cooked meals to customers for lunch and/or dinner. Now, since you are an individual running a proprietary business, you are eligible to avail a deduction under Section 80EEB.

 

Now, let’s tweak the above instance a bit! While everything else remains the same, the only difference here is you run this business with your friend. Now, since this becomes a partnership business, you are not eligible for Section 80EEB deduction.

 

What are the Conditions to Claim Section 80EEB Deduction?

Check out the conditions of claiming Section 80EEB deduction:

 

  • A loan must be taken to buy an electric vehicle. According to the Income Tax Act, “electric vehicle means 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”.

 

  • The loan must be obtained from a financial institution or a non-banking financial company (NBFC). According to the Income Tax Act, “financial institution means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in Section 51 of that Act and includes any deposit-taking non-banking financial company or a systemically important non-deposit taking non-banking financial company as defined in clauses (e) and (g) of Explanation 4 to Section 43B]”.

 

  • The loan should be sanctioned between April 1, 2019 and March 31, 2023.

 

The Section 80EEB deduction has been introduced to promote electric mobility in India. The ultimate goal is to offer financial incentives on buying electric vehicles and thereby increase its demand. So, while electric vehicles already offer countless environmental benefits, the government is trying to push people to buy these vehicles by offering benefits like tax exemption on loan interest repayment. Want to take a deep dive into income tax? Explore our ‘Income Tax’ section.

FAQs on Section 80EEB

  • ✔️For how long can I avail the Section 80EEB deduction?

    You can claim income tax deduction under Section 80EEB until you have fully repaid your loan taken to buy an electric vehicle.

  • ✔️What is the Section 80EEB limit?

    The maximum Section 80EEB limit is ₹1,50,000.

  • ✔️Can HUFs avail deductions under Section 80EEB?

    No, HUFs are not eligible for Section 80EEB.

  • ✔️What is Section 80EEB?

    Section 80EEB of Income Tax Act offers income tax deductions on the interest paid on loans for electric vehicles.

  • ✔️Why is Section 80EEB introduced?

    Section 80 EEB is introduced to promote electric vehicles.

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