DEDUCTION UNDER SECTION 80 EEB OF INCOME TAX ACT.

What is section 80EEB?

If an individual buys an electric vehicle for personal or for business use, the deduction would help an individual having a vehicle for personal use to claim the interest on the vehicle loan. This section was induced to promote electric vehicles in the country to decrease the rise in pollution. The government of India implemented this section in the year 2019 to provide incentives to purchase electric vehicles. The section 80EEB section was earlier introduced in the year 1961 in the Income Tax Act, 1961 ( “The Act”), newly it was innovated in 2019, and newly introduced in the year 2019 and its main aim was to promote electric vehicles.

Features of the Section 80EEB of The Act:

Amount of deduction:

According to this section, an individual can get a deduction amount up to Rs. 1, 50,000 per annum for paying the interest that is secure on a loan for the purchase of an electric vehicle. It can either be purchase for individual or business purposes. This will allow an individual who owns an electric vehicle for their personal use to claim the interest paid on the loan.

If the vehicles are for business use, they can claim for deduction up to 1, 50,000 per year under this act. Any payments made above Rs.1, 50,000 can be claimed under business expenses. To avail of this, the vehicle has to be registered in the name of the business enterprise owner. Also, note that the individual taxpayers should have all the necessary documents such as loan documents and tax invoices and obtain interest paid certificates at the time of filing the Income Tax Returns.

Eligibility criteria:

The deduction is only available to individuals. It is not available to any taxpayers. Thus, you can claim this if you are an AOP, HUF, a company, or any other taxpayer, you cannot claim any benefit under this section.

Conditions for claiming the deduction:

  • The loan must be sanctioned anytime between the period from 1 April 2019 to 31 March 2023.
  • The loan has to be availed from a non-banking financial company or a financial institution for an individual to buy an electric vehicle.
  • As per the act, an “Electric Vehicle” is a vehicle, is power exclusively by an electric motor whose traction energy is supply exclusively by a traction battery that is installed in the vehicle and has such electric regenerative braking system, which upon during braking provides for the conversion of vehicles kinetic energy into electrical energy.
  • The deduction under the act is available to both the residents and non-resident individuals in the absence of any specifications.
  • The maximum amount of deduction that is available per annum is 1, 50,000.
  • After the interest amount is claimable once under Section 80EEB, no further deduction is claimable for such interest payment under any other provisions of the Act.

Promotion of Electric Vehicle mobility:

The government has taken strong steps to promote electric vehicles in the country in order to avoid the rise in air pollution. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) is a scheme promoted by the Indian government to boost the mobility of electric and hybrid vehicles in India. The ultimate goal is to promote electric mobility and the scheme offers financial incentives for the purchase of electric vehicles for an individual and creating electric transportation and charging infrastructure. This scheme avails the purchase of two-wheeler, three-wheeler, and four-wheeler electric vehicles.

Phase 2 of the scheme starts from April 1, 2019, and ends by 31st of March 2022. This phase is an expanded version of phase 1.  The FAME India Phase II has a total expenditure of Rs 10000 crores spread for 3 years from April 1, 2019, until March 31, 2022.

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