Income Tax Deduction on Donation

Donations made to certain specific charitable institutions and relief funds are fully or partially exempt from taxation. Donations made to political parties are also available for exemption. The article will give you a brief on how one can claim income tax deduction on donation to reduce tax liability.

Income Tax Deduction on Donation made to Institutions and Funds

An assessee can claim a tax deduction on donation under section 80G of the Income Tax Act 1961. According to this section, one can either claim 100% or 50% of the total amount donated as a deduction subject to the ‘with’ or ‘without’ upper limit. As stated earlier the government notifies/updates the institutions and funds where any donation is fully or partially exempt from taxation.

Deduction on Donation with Upper Limit

For institutions or funds where the ‘with upper limit clause’ is applicable, a deduction of either 50% or 100% of 10% of the adjusted gross total income can be claimed. This percentage is also specified by the government for every institution and fund. The donations made towards the following institutions will fall under this category:

  • Donation by an organization towards Indian Olympic Association
  • Money donated to the local authority or the government for the purpose of family planning promotions.
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Deduction on Donation without Upper Limit       

If one donates to funds or institutions where ‘without upper limit’ is applicable, one can claim a flat 50% or 100% of the donation amount. The Prime Minister National Relief Fund and National Defence Fund are some of the funds where the condition of claiming 100% of the donation amount as a deduction is applicable. Some of the many Trust Funds where 50% of the donation amount is available for deduction are Jawahar Lal Nehru Memorial Fund and Prime Minister’s Drought fund.

Mode of Payment

  • One will be able to claim the deduction if the donation is made via cheque, digital payment method, or cash
  • The maximum deduction that one can avail of if the payment is done via cash is INR 2000
  • There is no maximum limit on the deduction amount if the payment is made via cheque or digital payment methods
  • Donations made in kind like those in the form of clothes, food rations, and so on, cannot be claimed as deductions under this section.

Income Tax Deduction on Donation made to Political Parties

Donations made to political parties can be claimed as a deduction under section 80GGC and 80GGB of the Income Tax Act, 1961. Individual taxpayers can claim the deduction under section 80GGC and companies can claim a deduction under 80GGB. There is no maximum upper limit specified and so any amount that has been contributed can be claimed as a deduction.

It is important to note that the donation made in the form of cash are not eligible for a deduction.

FAQs

If I donate clothes to a charitable institution can I claim deduction under 80G?

No, donations made in kind like clothes or food rations cannot be claimed under section 80G

Do I need to show receipt of the donation made to a political party?

Yes, as proof of the donation, the political party will issue a receipt. It will contain the name and address of the party, the amount donated and the PAN and TAN of the party. This receipt will be needed.

Income Tax on Gold in India

One can receive gold in several forms; in physical forms such as jewelry and coins; Or digital form through mobile wallets; Or in paper form by investing in gold mutual funds, gold exchange-traded funds (ETFs), and sovereign gold bonds (SGB). When one buys or sells gold it is important to know how it taxed on the hands of the taxpayers. This article will give an idea of how the tax on gold is computed in India.

Different Forms of gold and its Tax Treatment

Following are the ways in which different forms of gold are taxed:

Physical Gold

Physical Gold is the most common way of buying gold i.e. in the form of jewelry, gold bars and/or coins. The income arising from this form of gold falls under capital gains and the calculation of tax depends on the period of holding the gold jewelry/coins.

STCG: If the holding period (difference between buying and selling) of this form of gold is less than three years (36 months) then it will be classified as short-term capital gains. Such capital gains will be added to your income and taxed at the applicable interest rates.

LTCG: If the period of holding (difference between buying and selling) this form of gold is more than three years (36 months), it will be long-term capital gains. These capital gains will attract a 20% tax rate along with a surcharge if applicable and a 4% cess.

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Paper Gold

Paper Gold is another way of buying gold i.e. in the form of investing in gold mutual funds, gold exchange-traded funds (ETF) and/or sovereign gold bonds (SGB). This form is treated the same way physical gold is treated in terms of taxation.

STCG: If the difference between the date of investment and the date of redemption is less than three years, it is STCG. These gains will be added to your income and taxed at applicable tax rates.

LTCG: If the period of holding this form of gold is more than three years, it will be classified as LTCG. These gains will be taxed at 20% in addition to cess along with indexation benefits.

Individuals investing in SGB will earn an interest of 2.5% per annum and this earing will be classified as income from other sources. The taxation on returns from SGB is different from that of paper gold. The returns one acquires after 8 years of investment in SGB are tax-free but if one decides to withdraw pre-maturely then the returns are taxed at different tax rates. In addition to this, SGB has a 5 year lock-in period, any capital gains arising from the sale of these bonds after 5 years will be LTCG. This LTCG will be taxed at 20% with indexation including cess.

Digital Gold

Digital Gold is the latest form of owning gold in India. Various mobile wallets like Paytm, Google Pay and PhonePe have tied up with MMTC-PAMP or SafeGold to sell gold, starting from a minimum value of INR 1.

The tax treatment of digital gold is similar to paper and physical gold where the holding period decides the applicability of tax.

STCG: If the holding period is less than three years, returns are not taxed directly. They are added to the gross income and taxed at applicable tax rates.

LTCG: If the holding period is more than three years then a 20% tax on returns is to be paid, along with a surcharge and 4% cess. 

How to Save Taxes on LTCG from Investment in Gold?

The Income Tax Department provides provisions that can help in reducing the tax burden of paying 20% on LTCG from gold investments. Section 54F of the Income Tax Act provides tax exemption on the entire long-term earnings from the gold investment if the amount is reinvested into a residential property. Under Section 54EC, if the returns are invested in eligible bonds, then one can claim a tax exemption.

What is the Tax on Gold Received as Gift or Inheritance? 

In India, gifting gold or receiving gold in inheritance is considered a tradition. Therefore, apart from knowing the tax treatment of investing in gold, it is important to know the tax on gold received as a gift or in inheritance.

Tax on Gold received as Gift

If one receives gold as a gift from relatives i.e. parents, siblings or children then one does not have to pay tax on that. If one receives such a gift from someone who is not a close relative then it is considered income from another source. It is important to note that such a gift will only be taxable if its value exceeds INR 50,000.

In addition to this, if one sells the gold received as a gift then it will attract taxes as per the gains i.e. LTCG or STCG just like physical gold.

Tax on Gold received in Inheritance

If one inherits gold from their bold relative then one does not have to pay tax on that. If the gold is inherited by someone other than a blood relative then one has to pay the tax if the value of the gold is more than INR 50,000.

Here also, if one sells the inherited gold, LTCG or STCG will apply. In order to determine the holding period, one needs to consider the date of acquisition of the original owner of the items.

FAQs

How is gold ETF taxed in India?

If you are purchasing gold ETF and selling it at a profit within 36 months then it will be taxed as STCG and if sold after three years it will be considered LTCG and taxed at 20%.

I received a gold jewelry from my mother will that be taxable?

No, gold received as gift from you mother is not taxable.

Vivad Se Vishwas Scheme

Latest Extended Due Date

The deadline for filing declaration under the direct tax dispute resolution scheme ‘Vivad se Vishwas’ is extended to 30th June 2021.

What is Vivad Se Vishwas?

The Vivad Se Vishwas scheme provides for settlement of disputed tax, interest, penalty, or fees in relation to an assessment or reassessment order on payment of 100% of the disputed tax and 25% of the disputed penalty or interest or fee.

The taxpayer is granted immunity from levy of interest, penalty and institution of any proceeding for prosecution for any offence under the Income-tax Act in respect of matters covered in the declaration.

CBDT said it had received requests from taxpayers, tax consultants, and other stakeholders to extend time-barring dates in view of the severe COVID-19 pandemic raging unabated across the country.

Steps to File a Declaration under Vivad Se Vishwas

  1. Login to the Income Tax Portal

    Firstly, login to the portal and click on the Vivad se Vishwas option.

  2. Prepare and Submit DTVSV Form

    Select the year and the filing type.

  3. Fill out the Form

    Firstly, fill Form-1 correctly.
    Fill Form-2 as a final submission.
    File the required documents properly. File them with DSC or EVC accordingly.

FAQs

Can VSV form be revised?

It has been clarified in the CBDT Circular that, the Declaration in Form 1 can be revised any number of times, before the Designated Authority i.e. the PCCIT issues a Certificate of final tax amount payable under the Vivad se Vishwas Scheme.

Is Vivad SE Vishwas scheme extended?

The Central Board of Direct Taxes (CBDT) on Friday further extended the due date for filing declaration under the ‘Vivad Se Vishwas’ (VSV) scheme till 31st June 2021.

Tax Implications on VRS Compensation

Voluntary Retirement Scheme – VRS also known as ‘The Golden Handshake’ is an option that is provided to employees of an organisation to retire voluntarily from the services before the actual date of retirement. Under this scheme employees who decide to exercise this option will get a one-time lump sum payment called Voluntary Retirement Compensation.

There are several reasons for a company deciding to offer VRS, the most common reasons include reducing the cost of the operations by retrenching the surplus workforce. This article will give detailed information on VRS and its taxability in India.

What are the Tax Implications on VRS Compensation?

Under section 17(3) of the Income Tax Act, VRS falls under ‘Profit in Lieu of Salary’. As per the definition ‘Profit in Lieu of Salary’ is the amount of any compensation due or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions.

VRS is taxable in the hands of the employees and under the head ‘Income from Salary’. The following are the aspects that one needs to take into account while calculating the tax implications for VRS:

Exemption Under Section 10(10C)

As per this section, the amount that an employee receives for his/her service in;

  • public sector or any other firms,
  • authority established under Central, State or Provincial Act,
  • Co-operative Societies,
  • Local Authority,
  • Universities, IITs and Notified Management Institutes etc are considered to be exempt to the lowest of the following:
    • Three months salary for each completed year of service
    • Salary at the time of retirement multiplied by the balance months of service left before the date of retirement
    • INR 5,00,000
    • Actual amount received

Relief Under Section 89

Section 89 provides relief to mitigate the additional tax burden that may arise because of a large sum of money that suddenly paid in advance (in the form of VRS) or in arrears in a particular year. Individuals who wish to claim a relief u/s 89 must make sure to file form 10E before filing their income tax online.

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How to Calculate Relief Under Section 89?

Following are the steps to calculate refile under section 89:

  1. Calculate the total tax payable

    Firstly, calculate the total tax payable on the income, which includes additional salary, arrears or compensations, in the year you receive the compensation

  2. Compute the tax rate

    Now, Calculate the tax rate on total taxable income during the year in which you receive the compensation

  3. Calculate the tax on total income

    Next, calculate the tax on total income by adding 1/3rd of the VRS amount received in each of the three preceding previous years immediately preceding the year in which the VRS is received.

  4. Compute the rate of tax

    Now, Calculate the rate of tax for each preceding three years individually.

  5. Compute the average of rate of tax

    Next, compute the average of rate of tax for three preceding years.

  6. Amount of Relief

    Finally, calculate the amount of relief = VRS amount X [Step 2 – Step 5]

It is important to note that both section 10(10C) and section 89 are mutually exclusive. It means that an individual can only claim either exemption u/s 10(10C) or relief u/s 89. Moreover, if one claims an exemption or relief in any assessment year then it cannot be claimed again in any other assessment year.

Who is Eligible to Claim VRS?

The list of eligible employees as per Sec 10(10C) who can claim VRS Exemption includes employees of ‘any other company’. Thus, private sector employees can claim exemption subject to the following conditions as per Rule 2BA:

  • An employee has completed 10 years of service or completed 40 years of age (Does not apply to public sector employees)
  • Can be claimed by all employees including workers and executives except directors
  • VRS Scheme is initiated for a reduction in the existing strength of the employees
  • A vacancy caused by the VRS is not to being filled up
  • The retiring employee shall not be employed in another company belonging to the same management

FAQs

Can I claim both exemption and relief for the VRS Compensation?

No, both section 10(10C) and section 89 are mutually exclusive. This means that one can only claim either of the two.

Can I claim exemption on VRS Compensation for more than one year?

Exemption of INR 5 lakhs is a one-time exemption, i.e. an employee can claim this exemption only once in a lifetime.

Rebate Under Section 87A – Income Tax Rebate

The taxes paid by the citizens of India are utilized for the purpose of improving of the country’s economy. The Income Tax Department has created different tax slab rates for individuals with a different set of income. In order to make sure that the people with low taxable income do not get burdened with paying more taxes, the government has also set up provisions like claiming income tax rebate u/s 87A to reduce the tax liability of these people.

What is Income Tax Rebate Under Section 87A?

Under Section 87A of the Income Tax Act, 1961, resident individuals whose net taxable income is less or equal to INR 5,00,000 will be able to claim a tax rebate of a maximum of INR 12,500 or the amount of tax payable, whichever is lower.

What are the Eligibility Criteria to Claim a Rebate u/s 87A?

Individuals can claim rebate u/s 87A if they fall under the following criteras:

  • The total taxable income after deductions must not be more than INR 5,00,000
  • Senior citizens (aboe 60 years and below 80 years) can avail a rebate
  • Super senior citizens i.e. more than 80 years old are not eligible to claim a rebate u/s 87A
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How to calculate Tax Rebate u/s 87A?

Following are the steps to calculate the tax rebate amount:

  1. Add all your incomes

    To calculate the rebate amount one needs to add their incomes from all sources to arrive at Gross Total Income

  2. Claim Chapter VIA Deductions

    Now reduce the tax liability by claiming all the applicable chapter VIA deductions

  3. Arrive at Net Taxable Income

    Arrive at your net taxable income after claiming the tax deductions

  4. Net Taxable Salary is less than or equal to INR 5 lacs

    After applying all applicable deductions if your net taxable salary is less than or equal to INR 5,00,000 than you are eligible to claim a rebate under section 87A

Let us take an example to understand the calculations better:

Mr Kumar, age 45 is a salaried residential individual.

Particulars for FY 20-21 Income
Gross Total Income 6,00,000
Deductions 1,50,000
Net Taxable Income: 450,000
Tax Payable before cess(5% INR 2.5 to INR 5 lakh) 10,000
Tax Rebate u/s 87A (INR 12,500 or tax payable whichever is lower) 10,000
Tax Payable Nil

FAQs

Can HUF’s claim tax rebate under section 87A?

No, only resident individuals can claim a rebate under this section. Companies and HUF cannot avail this benefit.

Can I claim a tax rebate of flat INR 12,500?

No, individuals are entitled to claim tax rebate u/s 87A of INR 12,500 or 100% of tax liability amount whichever is lower

Save Tax with the Help of your Family

Family members can be extremely instrumental in providing you financial benefits. In context with the income tax, a certain part of your money can be associated with your family members which could help you save tax. In this article we discuss some of the methods that help us save taxes.

Methods to Save Tax

Invest in the name of parents

This method is applicable to people whose parents fall under the non-taxable or lower tax bracket. It is possible to invest money under their names in the form of gifting them the money. This amount will not be taxable as monetary gifts to specified relatives are not taxed. It is possible to invest this money under FDs, in the senior citizens savings scheme, etc. Senior citizens are have tax exemptions of up to INR 50,000 on interest income from saving or fixed deposits in any bank, post office or co-operative bank.

The taxpayer can receive benefit u/s 80TTB for savings or fixed deposits and will be able to save up to INR 50,000 to INR 2,50,000 depending on parents’ income, and in addition, also INR 50,000 from the interest income.

Pay rent to parents

Receiving income from salary and living with your parents provides you an opportunity to save tax. The house should be owned by your parents and should not be co-owned by you. In this case, you can pay them rent and claim it under HRA. Your parents can claim a deduction of 30% of the annual rent for repairs and maintenance under section 24. This benefit is receivable under section 10(13A). In this case, you will be able to save the least of the following three:

  • Actual rent payable minus 10% basic salary
  • Total HRA that the employer provides
  • 40-50% of basic salary depending on residential conditions

Buy Health Insurance

It is possible to purchase health insurance for your parents who are above the age of 60 and claim deduction of up to INR 50,000 for the premium payable. Taxpayers can claim this benefit u/s 80D.

Joint Home Loan

A husband and a wife who are co-owners and co-borrowers of a self-occupied property, each can claim tax benefit on interest and principal payable for a home loan. Taxpayers can claim exemption u/s 80C in such situations. There is a possibility to save up to INR 7,00,000 depending on the amount of home loan.

Providing a Loan

Gifting money to your wife and investing the same amount will be clubbed with your income and taxed, unless you choose a tax free instrument such as the PPF. It would be better to provide a loan to your partner who was low or no income at a reasonable rate of interest. Though the interest will be added to your income and taxed, you will be able to save if she invests in an instrument with a higher rate of return.

Education Loan

Taking an education loan for higher studies will yield in the taxpayer receiving tax benefit on repayment of interest for up to 8 years starting from the year in which interest payment begins. Furthermore, the loan has to be from a financial institution such as a bank approved by the government. Taxpayers can save tax u/s 80E in this situation.

Invest for ward in PPF, mutual fund, ULIP

You can invest under your ward’s name as investment in certain mutual funds, ULIPs and traditional insurance plans are entitled to tax benefit u/s 80C. The income will be taxable. To avoid this, you can invest in tax free investments such as PPF. It is also possible to invest under equity mutual funds as there is no tax if the gain is less than INR 1,00,000 a year.

Pay tuition fee, education allowance or hostel accommodation fee

The is only applicable if the taxpayer has not completely used up section 80C deduction limit. This method can include the payable tuition fee for a maximum of two children every year. Salaried employees can claim an exemption of INR 100 every month per child up to two kids as children’s allowance. They can also claim INR 300 per child as hostel expenditure allowance.

Deduction for dependent with disability

If a taxpayer has a family member with a disability or a specific disease that requires huge medical expenses or maintenance, then, they can receive a tax benefit on the expenses they incur. They can claim a deduction under section 80DDB.

Invest under the name of adult children

If your child is above the age of 18, he/she will have to pay their taxes on the income they earn. Therefore, clubbing income rules will not be applicable to their situation anymore. Hence, if they fall under the tax exempt category, you can gift them money. The money you gift them can be invested in tax-free instruments, and the income earned will be tax free.

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FAQs

What is the limit for deduction under section 80C?

The maximum limit for deduction under section 80C is INR 1,50,000.

Can I claim deduction u/s 80E if my father has paid the loan?

No, you can not claim deduction u/s 80E. However, your father can claim a deduction u/s 80E. Because relative includes children of an individual.

Can I claim Chapter VIA deductions under the New Tax Regime?

With the majority of income tax deductions slashed in the New Tax Regime, some Deductions are still claimable.
– Rebate u/s 87A
– Standard Deduction on Rent Received
– Agricultural Income
– Life Insurance Income to Beneficiary
– Retrenchment Compensation
– Voluntary Retirement Scheme
– Leave Entrenchment on Retirement

Income Tax on Sale and Purchase of Motor Vehicle in India

India is a country with the third-largest road network in the world and today there are more than 300 million vehicles. According to Statista, travelling by road is considered a preferred choice in India with over 60 percent of the population using personal or shared vehicles for commuting from one place to another. Hence, it becomes crucial for taxpayers to understand the tax implications on the sale and purchase of the motor vehicle. This article will help you understand the various aspects related to the sale/purchase of motor vehicles.

What do you mean by Motor Vehicle?

With respect to calculating the tax on sale and purchase of a motor vehicle, Motor Vehicle includes cars, buses, motorcycles, off-road vehicles, light and regular trucks.

Tax on Sale of Vehicle

If the motor vehicle is being used for personal purpose then it will not attract any tax on the sale of the vehicle as it is not considered a capital asset. However, if the motor vehicle is used for business purpose then it is considered as a capital asset and hence long term or short-term capital gains tax will be applicable.

Tax on Purchase of Vehicle

As per the finance bill 2016, when a motor vehicle is purchased the seller is required to deduct TCS. Under section 206(1F) a seller has to deduct TCS @1% on the sale of the motor vehicle that is above INR 10,00,000. It is to be noted that this tax provision will also be applicable if someone buys parts of a vehicle for INR 2,00,000 or more.

Now, as of October 1, 2020, if the buyer is a dealer i.e. B2B then TCS is required to be collected u/s 206C (1H). If the buyer is an end customer i.e. B2C then TCS is must be collected u/s 206C (1F) and section 206C(1H) may apply when the consideration received for the sale of the motor vehicle is less than INR10 lakhs but the aggregate value of which exceeds INR 50 lakhs.

Under Section 206C(1H) as of October 1, 2020 seller is required to collect TCS@ 0.01% on receipt of a sum above INR 50,00,000 against the sale of goods. It is also important to note that because of COVID 19, the rate of TCS is 0.075% (a concession of 0.025% is given) till March 2021.

Measures taken by the Government to promote the sale of electric vehicle

In order to promote the sale of electric vehicles, a new section 80EEB was introduced. Under this section as of April 1, 2020, an additional deduction of INR 1,50,000 can be claimed on the interest paid on the loan taken for the purchase of an electric vehicle.

GST on Motor Vehicle

On Motor vehicles, GST is charged ranging from 12% to 28%. In addition to GST, composition cess is also levied ranging from 1% to 22%. These rates are charged based on whether the car is petrol, diesel or electric.

FAQs

If the motor vehilce is sold for INR 10,00,000, will TCS be applicable?

No, according to the provision, TCS will be applicable if the value of the vehilce is exceeding INR 10,00,000.

Is the TCS charged in Ex-showroom price or on-road price?

TCS @ 1% is charged on the ex-showroom price i.e. on sales consideration of the vehicle.

Is the limit of INR 10,00,000 inclusive of tax?

Yes, the limit INR 10,00,000 is inclusive of VAT i.e. Sales Consideration.

Section 80GGC – Deduction on Donation given to Political Parties

Individuals making donations to political parties can claim tax deductions under section 80GGC of the Income Tax Act. There are certain eligibility criteria to follow in order to claim deduction under this section. This article will help in understanding the various aspects that need to be kept in mind while availing deduction under section 80GGC.

What is the Eligibility Criteria to Claim Deduction u/s 80GGC?

An individual who is planning to claim a deduction under section 80GGC must comply by the following criterias:

  • One must make donations to a political party or an electoral trust to claim a deduction
    • With respect to section 80GGB and 80GGC a ‘Political Party’ is defined as a political party registered under section 29A of the Representation of the People Act, 1951
  • Any person i.e. individual, HUF, firm, an AOP, BOI or an Artificial Juridical Person can claim a tax benefit under this section
  • Any local authority or artificial juridical person that is wholly or partly funded by the government will be able to claim deduction under this section
  • Companies do not qualify to claim deduction under 80GGC
  • An assesses or the taxpayer can claim the entire (100%) contribution amount as a deduction under this section
  • This deduction falls under Chapter VI A meaning that the total amount of tax deduction must not be more than the complete assessable income of the person
Deduction under section 80GGC is not allowed if the taxpayer opts for the new tax regime
Tip
Deduction under section 80GGC is not allowed if the taxpayer opts for the new tax regime

What are the Exceptions Under Section 80GGC?

  • As of April 1, 2014, the donation made to the political parties or electoral trusts must not be in the form of cash. Donation made in the form of cash is not eligible under this section.
  • Any donation made in the form of gifts or kind cannot be claimed as a deduction under this section

What is the Procedure to Avail Deduction Under Section 80GGC?

Below mentioned are the things one needs to keep in mind for availing deduction under 80GGC:

  • Fill out the specified ITR Form
  • Under Chapter VI-A, the section 80GGC is mentioned, one has to fill in the amount of contribution made by you to the political party of your choice
  • Individuals must submit the details of the donations to the employer for incorporating it in form 16. If not then the details must be mentioned in the specified column while submitting tax returns
  • As proof of the donation, the political party will issue a receipt. It will contain the name and address of the party, the amount donated and the PAN and TAN of the party

FAQs

What is the difference between section 80GGC and 80GGB?

Under section 80GGC deduction is allowed only to an assessee, being any person whereas under section 80GGB deductions can availed by any Indian company.

Can I claim tax benefits on donations made to more than one political parties?

Yes, one can claim a deduction on donations made to multiple political parties, u/s 80GGC.

How much tax deduction is allowed on the amount donated to a political party?

One can avail a deduction on 100% of the amount contributed, provided that the same is made by any mode other than cash.

Section 80EEB – Deduction for Interest paid on Loan for E-Vehicle

In order to promote and motivate individuals to buy electric vehicles, the Government of India in Budget 2019 announced to provide a deduction for the purchase of an electric vehicle. A new section 80EEB was introduced. It allows deduction on the interest paid on the loan for the purchase of an electric vehicle.

Who is Eligible to Claim Deduction Under Section 80EEB?

Only Individuals can claim deductions under section 80EEB of the Income Tax Act. Any other entity i.e. a partnership firm, HUF, a company or AOP cannot claim deduction under this section.

Deduction under section 80EEB is not allowed if the taxpayer opts for the new tax regime
Tip
Deduction under section 80EEB is not allowed if the taxpayer opts for the new tax regime

What are the Conditions to Claim Deductions Under Section 80EEB?

  • The loan that is taken for the purchase of an electric vehicle must be taken from a financial institution or an NBFC
  • The loan taken for the purpose of buying an electric vehicle must be sanctioned between April 1, 2019 and March 31, 2023
  • Deductions under section 80EEB are effective from AY 2020-21
  • A deduction can be claimed on the loan for the purchase of 2 wheeler as well as 4 wheeler
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What is the Deduction Amount available Under Section 80EEB?

An individual taxpayer can claim interest on loan of an electric vehicle of upto INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. Additionally, you can also claim depreciation as a business expense on the asset. It is to be noted that in order to claim the business expense the vehicle is registered in the name of the owner or the business enterprise. Individual taxpayers must also make sure to have all the necessary documents when filing an income tax return.

FAQs

Can I claim a deduction u/s 80EEB for the repayment of principle amount on the loan that is taken for an electric vehicle?

No, one can only claim a deduction u/s 80EEB on the interest payment of the loan.

For how many years can I claim a deduction under section 80EEB?

An individual can claim a deduction under this section until the repayment of the loan.

I have taken a loan from a relative to purchase an electric vehicle. Can I claim a deduction u/s 80EEB?

No, in order to claim a deduction under section 80EEB the loan must be taken from a financial institution or an NBFC