One of the most important aspects of mitigating climate change and promoting green growth is electric mobility. Currently, India has 2 million Electric Vehicles (EVs) on road. More than half of all vehicle models are expected to be electrified by 2030. To promote green mobility, the Government of India introduced various benefits to the Indian citizens. One such benefit is given under Section 80EEB of the Income Tax Act, 1961. This section came into force on April 1, 2020, meaning the benefit under Section 80EEB can be taken from A.Y. 2020-2021 onwards.
This article tries to cover all aspects of Section 80EEB and how to maximize the tax benefits from the said section.
Table of Content
To encourage the use of electric vehicles and to reduce carbon emissions, the Government of India encourages use of electric vehicles to the Indian citizens. To promote the use of electric vehicles in India, Section 80EEB is introduced. Under this section, the interest paid on loan for the purchase of electric vehicles whether two wheeler or four wheeler is allowed as a deduction upon satisfaction of certain conditions.
Meaning of Electric Vehicle
Electric Vehicle (EV) is defined under Section 80EEB and has the following features:
A vehicle that is powered entirely by an electric motor.
Whose traction energy is exclusively supplied by the traction battery installed in the vehicle.
The vehicle has an electric regenerating braking system that converts kinetic energy into electrical energy while braking.
Meaning of Financial Institution
Section 80EEB defines a financial institution as: a banking company to whom the Banking Regulation Act, 1949 is applicable, or any bank or banking institution as per Section 51 of the said Act. It also includes deposit-taking non-banking financial companies.
Deduction under Section 80EEB
Section 80EEB allows for a deduction in respect of interest on loan taken for the purchase of Electric Vehicle (EV). However, the loan should be sanctioned on or after April 1, 2019. Moreover, a maximum of INR 1,50,000 can be allowed as a deduction under Section 80EEB for interest payments on loans obtained for the purchase of an EV.
Who can Claim Deduction under Section 80EEB?
Section 80EEB allows for a deduction only to the individuals who avail loan for the purchase of EVs. Therefore, deduction under Section 80EEB cannot be claimed by:
Association of Persons (AOPs)
Body of Individuals (BOIs)
Unique Features of Section 80EEB
Some peculiar features of Section 80EEB are as follows:
The focus of Section 80EEB is to make Electric Vehicles (EVs) more viable environmentally and financially.
The section applies to both two-wheeler and four-wheeler, thereby, caters a wide range of potential customers.
The amount of deduction of INR 1,50,000 enhances the affordability of buying the same.