What is the 80EEB Electric Vehicle Tax Benefit?

Electric vehicles (EV) are gaining popularity among auto buyers. They not only surpass traditional petrol or diesel cars in various aspects but also contribute to a cleaner environment. Besides being cost-effective, EV owners can get tax benefits under Section 80EEB of the Income Tax Act. The introduction of Section 80EEB allows taxpayers who have taken loans to get electric vehicles, to enjoy tax deductions on the interest payments for these loans.

 

Introduction of Section 80EEB

In a significant move to promote the adoption of EVs, the government introduced Section 80EEB into the Income Tax Act during the 2019 Union Budget. This section was purposefully added to provide incentives for individuals who choose to buy electric vehicles.

 

Under Section 80EEB, taxpayers can claim a deduction on the interest paid for loans taken to buy electric vehicles. This addition to the Income Tax Act aligns with the government's larger strategy to encourage electric mobility across the country.

 

Initiatives like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) subsidy program have already been in place. The introduction of Section 80EEB further shows the government's commitment to making EVs a more cost-effective choice for taxpayers. This is aimed at promoting a greener, cleaner, and more sustainable future for India's transportation sector.

 

Eligibility To Get Benefits on Section 80EEB

It is important to highlight that only individuals are eligible for deductions under Section 80EEB of the Income Tax Act. This means that entities such as Hindu Undivided Families, firms, associations of persons, limited liability partnerships, companies, or any corporate entity cannot avail of the benefits of section 80EEB.

 

Section 80EEB is exclusively designed to incentivize individual taxpayers who get loans to buy electric vehicles. This targeted approach ensures that the benefits of this electric vehicle tax rebate are directed towards individuals contributing to the adoption of cleaner and greener solutions.

 

Conditions For Claiming the Deduction

To claim deductions under Section 80EEB of the Income Tax Act, specific conditions must be met. The conditions are:

• The loan used for purchasing an electric vehicle must be bought from a recognized financial institution or a non-banking financial company.
• The loan must be sanctioned within a defined timeframe, spanning from April 1, 2019, to March 31, 2023.

 

Moreover, it is important to understand the definition of an electric vehicle in the context of this provision. An electric vehicle, as per Section 80EEB, is a vehicle powered solely by an electric motor. Its traction energy is exclusively supplied by a traction battery integrated into the vehicle. Also, it must have an electric regenerative braking system, which, during braking, converts the vehicle's kinetic energy into electrical energy.

 

The Documentation Needed For 80EEB Deduction Claim

Only those EV owners who have the necessary documentation can deduct certain expenses from their taxes under Section 80EEB. These records include:

• Certificate of interest paid on the EV loan
• Tax invoice of the EV
• Other loan-related documents

 

Amount of Deduction

Under Section 80EEB of the Income Tax Act, taxpayers are eligible for deductions on interest payments up to Rs 1,50,000. This deduction is applicable to individuals who own electric cars for both personal and professional purposes. For individuals using electric vehicles for personal use, this provision facilitates the deduction of the interest paid on their loans.

 

For business purposes also, individuals can claim a deduction of up to Rs 1,50,000 under Section 80EEB. Any interest payments exceeding this limit can be written off as a legitimate business expense. It is important to note that to get this deduction, the EVs must be registered either in the individual owner's name or in the name of the business entity.

 

When filing their returns, individual taxpayers should ensure they have the necessary documentation. This ensures a smooth and accurate claim of the applicable deductions by maximizing the financial benefits of owning and using electric vehicles.

 

Switching to Electric Vehicles

The introduction of Section 80EEB as a tax deduction benefit represents just one feature of the government's multiple efforts to promote the widespread adoption of electric vehicles. These government initiatives, along with an increasing awareness of climate change, have collectively played a role in driving the escalating numbers of electric vehicle purchases.

 

These measures show a national commitment to sustainable and environmentally responsible transportation. This addresses both the pressing need for reduced emissions and the importance of combating climate change on a global scale.

 

Switching to EVs is both about reducing the carbon footprint and also making a financial move. If you are considering purchasing an electric car through a loan, it is important to maximize the benefits offered in the 80EEB deduction to make your investment more economically viable.

 

Beyond tax incentives, once you have bought your electric vehicle, consider getting comprehensive insurance coverage to provide additional financial protection. Just like conventional fuel-powered vehicles, you can conveniently buy Electric Car Insurance from Shriram General Insurance.

 

Conclusion

In India, the growing popularity of electric vehicles has been largely due to electric vehicle income tax deduction offered under Section 80EEB and FAME subsidy. This incentive not only encourages sustainability but also gives eligible taxpayers the opportunity to increase their tax savings.

 

By using this deduction, individuals can actively contribute to environmental conservation efforts. Also, when combined with appropriate Electric Car Insurance coverage, the tax deduction offers an added layer of financial security.

 

FAQs

1. Is the principal amount of the loan that is taken for EVs eligible for deduction under 80EEB?

No, only the loan's interest payment is eligible for a deduction under section 80EEB.

 

2. If someone borrowed money from relatives to buy an electric vehicle, can they claim a deduction under 80EEB?

No, a loan must be taken through a bank or an NBFC to be eligible for a deduction under section 80EEB.

 

3. Does the Income Tax Act's Section 80C include Section 80EEB?

The Section 80EEB does not come under 80C. For various investments and expenses, such as ELSS, life insurance premiums, PPF, home loan repayment, etc., the 80C offers tax deductions and refunds.