Section 80EEB: Tax Exemptions and Eligibility

Section 80EEB of the Income Tax Act, 1961, deals with the interest payments made on electric vehicle loans for personal or business use. The Government of India implemented Section 80EEB to promote electric mobility. Its provisions are applicable to both four-wheelers and two-wheelers. 

 

You can avail deductions of up to ₹1.5 Lakhs under Section 80EEB, and these deductions are available until the debt is fully paid off. This means, you can deduct interest on loans for work-related EV purchases, exceeding ₹1.50 Lakhs, from your business expenditures. To achieve this, make sure the company or its owner's name appears on the vehicle's registration.

It should be emphasised that deductions under Section 80EEB will only be available to one person. As a result, the provisions of this new section cannot be used by the following: 

• Associations of Persons

• Firms 

• Companies 

• Limited liability partnerships 

• Hindu Undivided Families 

 

There are a few more criteria pertaining to the loan that you must adhere to be eligible for availing provisions under Section 80EEB: 

• Loan amount must be utilised to purchase an EV 

• Loan must be availed from an approved NBFC or bank

A loan must be secured from a financial institution or non-banking financial organisation in order to purchase an electric vehicle. Anytime between April 1, 2019, and March 31, 2023, the loan must be approved. 

 

A vehicle that is exclusively powered by an electric motor for which the traction energy is supplied by a traction battery that is installed in the vehicle and has a regenerative braking system that is electric that while braking converts the vehicle’s kinetic energy into electrical energy" is defined as an "electric vehicle".

According to Section 80EEB, interest payments up to ₹1.5 Lakhs are deductible. This makes it easier for people who own EVs for personal or private use to deduct the interest they paid on their loans.

 

A person may also deduct up to ₹1.5 Lakhs for business activities under Section 80EEB. The corporation may deduct interest payments that total more than ₹1.50 Lakhs as an expense.  Remember, an individual taxpayer submitting a return must have the interest paid certificate and all necessary documents. This includes the tax invoice and loan paperwork, readily in hand.

Here are the benefits of Section 80EEB deductions:

1. Loan Amount Limit

The deduction is available on loans sanctioned on or after April 1, 2019, but not later than March 31, 2023. The maximum loan amount for which the deduction can be claimed is ₹1.50 Lakhs.

2. Vehicle Type

The deduction is applicable only for loans taken to purchase electric vehicles. 

3. Ownership

The taxpayer must be the owner of the electric vehicle for which the loan is taken to be eligible for the deduction.

4. Additional Deduction

This deduction is over and above the benefits provided under Section 24(b) for home loan interest and Section 80C for various investments.

• EVs are exempted from road taxes, and registration fees are lower in certain states, including Delhi

• Deduction can only be claimed on first time EV purchases 

• Electric cars will not be subject to the green tax

The Union Cabinet approved Phase II of the FAME scheme, which aims to promote the use of electric vehicles across the country. To promote the use of hybrid and electric  vehicles in the country, the Indian Government established the Faster Adoption and Manufacturing of Electric Vehicles (FAME) incentive programme.

 

The program's only objective is to boost electric mobility. It does so by offering financial incentives to buy EVs and building the necessary infrastructure for charging and transportation of such vehicles. 

 

The future of automobiles lies with electric vehicles. Each year, a new model of these affordable, efficient, and environmentally friendly cars is introduced in India. With relation to the purchase of an EV, the tax saving option provided by this Section presents an alluring opportunity.