This is a newly inserted section 80EEB in budget 2019 where in government has introduced a tax benefit in case of purchase of electric vehicles. The purpose behind the incentive is to encourage the people of India to shift from Non- Electric vehicle to Electric Vehicles. The section 80EEB has been introduced allowing a deduction for interest paid on loan taken for the purchase of electric vehicles from the AY 2020-21.
What is Section 80EEB ?
80EEB Deduction in respect of purchase of electric vehicle.
- In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of purchase of an electric vehicle.
- The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2020 and subsequent assessment years.
- The deduction under sub-section (1) shall be subject to the condition that the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023.
- Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.
- For the purposes of this section,—
- “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.
- “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.
Features of Section 80EEB
A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEB. An individual taxpayer may have an electric vehicle for personal use or for business use. This deduction would facilitate individuals having an electric vehicle for personal use to claim the interest paid on the vehicle loan.
Eligibility criteria
The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.
Terms for claiming the deduction
- The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.
- The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.
- “Electric vehicle” has been defined to mean 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.
Way Forward
Do note that an individual taxpayer should obtain the interest paid certificate and keep the necessary documents such as tax invoice and loan documents handy at the time of filing of the return.
In case of business use, an individual can also claim the deduction up to Rs 1,50,000 under section 80EEB. Any interest payments above Rs 1,50,000 can be claimed as a business expense. To claim as a business expense, it is necessary that the vehicle should be registered in the name of the owner or the business enterprise.
source: Income tax of India website. Disclaimer : This blog post is only for information purpose. If you want to claim tax related deductions then take consultation from your personal tax consultant. Moneytek.in is not responsible for any kind of loss or profits.