With a view of promoting the sustainable methods of living for the present as well as future generations, the Government of India through the Union Budget of 2019-2020 announced an incentive for the purchase of electrical vehicle and a new section namely Section 80EEB or deduction on electrical vehicle was introduced in the Income Tax Act.
What Is Section 80EEB that allow deduction on electrical vehicle?
As per the provisions of Section 80EEB, a taxpayer is allowed a deduction on electrical vehicle for interest paid on the loan amount taken for the purchase of an Electric Vehicle (EV), whether it is done for personal usage or regarding any business purposes. A taxpayer can avail deduction under this section till the loan is repaid.
Also Read: Section 80EEA | Deduction On Interest Paid On Home Loan
Who can claim deduction under Section 80EEB?
The deduction under Section 80EEB can be claimed only by individuals and that too who have opted for Old Tax Regime. Therefore, it is not available to HUFs, Firms, Companies, AOPs, BOIs or any other legal person and individuals opting for New Tax Regime.
Read Here: Which Tax Regime Suits You: Old V. New?
How much deduction can be claimed under Section 80EEB?
The individuals can avail a deduction amount of up to Rs 1,50,000 on payment of interest on a loan secured on purchasing an Electrical Vehicle. Further, an individual can own the electrical vehicle for his personal use or for the purposes of his business. In any of these cases, the individual can claim a deduction of upto Rs. 1,50,000 on payment of interest on loan.
Therefore, the amount of deduction that can be claimed under Section 80EEB is
– Actual amount of interest payment on loan, or
– Amount of Rs. 1,50,000/-
whichever is lower.
Also Read: Deduction Under Section 80E – Interest Paid On Higher Education
Note:
The individual must have the record of important documents such as tax invoice and loan documents at the time filing of the income tax return for the purposes of claiming the deduction.
Conditions To Be Fulfilled To Claim The Deduction Under Section 80EEB
- Source and period of sanction :The loan must be taken from Financial Institution
- Time period of loan: The loan must be sanctioned during the period between 01st April, 2019 and 31st March, 2023.
- Purpose : Loan should be taken to purchase electric vehicle.
- No deduction under any other provision : The interest allowed under section 80EEB shall not be available under any other section of the Act.
Illustration
Elon bought an electric car on loan and the treatment of the amount over the different financial years for the purposes of deduction under Section 80EEB is as follows:
| Loan Period | Loan Taken From | Maximum Deduction available under Section 80EEB | Reasons |
|---|---|---|---|
| FY 2018-19 | Financial Institution | NIL | Loan taken before the period 1st April, 2019 to 31st March, 2023 |
| FY 2019-20 | Maternal aunt | NIL | Loan taken from relative. |
| FY 2022-23 | Financial Institution | Rs. 1,50,000 | All conditions satisfied. |
Also Read: 10 Ways To Save Your Taxes!
FAQs
“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.
The individual can continue to claim the deduction of Section 80EEB till the time he is fulfilling all the above mentioned conditions and his loan amount is repaid by him.
No, you cannot claim deduction under Section 80EEB in case you have taken loan from anyone apart from the financial institution.
No, the deduction of Section 80EEB is available only under the Old Tax Regime.
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