Section 80EEB has been inserted by the Government with effect from the financial year 2019-20 (assessment year 2020-21).
As per section 80EEB of the Income tax act, 1961, an individual can claim tax deduction for interest if a loan has been taken for the purpose of an electric vehicle (EV). Section 80EEB tax deduction for interest on loan taken for purchase of electric vehicle (EV) is not available to any other taxpayer such as a HUF, AOP, Partnership firm and a company.
To claim tax deduction the vehicle must be powered exclusively by an electric motor whose traction energy is supplied exclusively by a traction battery installed in the vehicle.
Such an electric vehicle (EV) must have an electric regenerative braking system which during braking provides for the conversion of vehicle kinetic energy into electrical energy.
Section 80EEB tax deduction is not available on interest on loan taken for purchase of a hybrid car, which uses conventional engines to generate some of its power. Section 80EEB says the vehicle must be powered exclusively by an electric motor, therefore, any vehicle using conventional engine will not be allowed to claim tax deduction under section 80EEB.
To claim tax deduction under section 80EEB, loan must be taken from a financial institution and sanctioned during 1st April 2019 and 31st March 2023.
Amount of tax deduction for interest on loan taken for purchase of electric vehicle (EV)-Section 80EEB
If conditions of section 80EEB of the Income tax act, 1961, is satisfied then the assessee can claim tax deduction in respect of interest payable on the loan taken for purchase of electric vehicle or 1,50,000 rupees, whichever is less.
Which means the maximum ceiling limit fixed by section 80EEB is 1,50,000 rupees.
For example, if actual interest payable on the loan taken for purchase of electric vehicle is 1,00,000 rupees, then the entire amount can be claimed as tax deduction under section 80EEB. If the amount is 1,60,000 rupees per year, then the amount of tax deduction will be restricted to 1,50,000 being the maximum ceiling limit of section 80EEB.
Section 80EEB tax deduction is available for the assessment year 2020-21 and for subsequent assessment years.
Please note, if you are taking benefits of section 80EEB tax deduction, then such interest is not again deductible under any other provisions of the Income tax act, 1961. However, if your interest on loan for purchase of electric vehicles (EV) is more than 1,50,000 rupees, then the amount over and above the amount claimed as tax deduction can be claimed as business expenditure. Double deduction is not allowed only for the amount that is claimed as tax deduction under section 80EEB.
As a taxpayer you must make sure to have all the loan documents such as interest certificates from the financial institution with you while filing your income tax return.
Frequently asked questions on Section 80EEB-Tax deduction for interest on loan taken for purchase of electric vehicle (EV)
I have purchased the electric vehicle (EV) for my business use. Will i be eligible for tax deduction?
Yes, The electric vehicle can be used for personal use and business use to claim tax deduction under section 80EEB as there are no such restrictions.
In case you are using an electric vehicle for business use, then tax deduction can be claimed up to 1,50,000 rupees.
In case interest payable is more than 1,50,000 rupees, then you can claim 1,50,000 tax deduction under section 80EEB and balance as business expenditure.
I want to claim tax deduction for interest on loan taken for purchase of electric vehicle (EV). Do I need to submit any documents while filing my Income tax return?
No, you need not submit any document while taking tax deduction in your Income tax return. However, you should have all these documents with you in case your assessing officer asks for them.
What is a financial institution? Can I claim tax deduction under section 80EEB for a loan taken from my friend?
A financial institution is a banking company to which the Banking Regulation Act, 1949 applies or any bank or banking institution referred to in section 51 of the Banking Regulation Act, 1949.
No, you are not allowed to claim tax deduction for the loan taken from your friend.
You can take benefit of section 80EEB if your loan is from an approved bank or a non-banking financial company (NBFC).
Can I claim tax deduction under section 80EEB if I opt for a new tax regime?
No, tax deduction under section 80EEB for interest on loan taken for purchase of electric vehicle (EV) is not available if tax is payable under the alternative tax regime under section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE.
