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 a deduction on the interest paid on the loan for the purchase of an electric vehicle. It was also stated in the budget speech by Honourable Finance Minister that advance battery and registered e-vehicles will be incentivised under this scheme.
Who is Eligible to Claim a 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.
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.
- Electric Vehicle refers to a vehicle solely powered by an electric motor whose traction energy is supplied exclusively by traction batteries installed within the vehicle as well as having an electric regenerative braking system which allows it to recoup energy during braking.
- Deduction under section 80EEB is effective from AY 2020-21.
- A deduction can be claimed on the loan for the purchase of 2 wheeler as well as 4 wheeler.
- Interest that is allowed under this section can not be offered in any other section.
What is the Deduction Amount available Under Section 80EEB?
An individual taxpayer can claim interest on a loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. Individual taxpayers must also make sure to have all the necessary documents when filing an income tax return. This deduction is available for all years where interest on the loan is paid.
However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, the loan should be reported as a liability and the interest on the 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.
Let’s understand with an example
Mr. Swapnil is a salaried individual who has purchased an electric vehicle for personal use on loan. The loan was taken from Public sector bank and date of loan sanction is 25/03/2019 and date of disbursement is 01/05/2019. In this case Swapnil would not be able to claim deduction under section 80EEB since the date of sanction of loan is before 01/04/2019.
Promotion of Electric Vehicles
The union cabinet has approved Phase II of the FAME scheme, which aims to promote the use of electric vehicles across the country. To promote the use of electric and hybrid vehicles in the country, the Indian government established the FAME (Faster Adoption and Manufacturing of Electric Vehicles) incentive programme.
The program’s only objective is to boost electric mobility, and it does so by offering financial incentives to buy them and by building the necessary infrastructure for charging and transportation of electric vehicles. The policy includes incentives for electric two-wheelers, three-wheelers, and four-wheelers. Phase II of the initiative will started on April 1, 2019, and it will go until March 31, 2022. A longer version of Phase I is Phase II. A total of Rs 10,000 crores would be spent on FAME India Phase II over the course of three years, from 1 April 2019 to 31 March 2022.
No, one can only claim a deduction u/s 80EEB on the interest payment of the loan.
An individual can claim a deduction under this section until the repayment of the loan.
No, in order to claim a deduction under section 80EEB the loan must be taken from a financial institution or an NBFC
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to 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. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.
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