Deduction for Electric Car in India under Income Tax
The Central Government has been making efforts for promoting electric mobility in the country due to the environmental issues caused by diesel & petrol vehicles. The Government has brought a scheme named "Faster Adoption and Manufacturing of Electric Vehicles" (FAME). This is an incentive scheme intended to promote electric and hybrid vehicles in the country. The objective of the scheme is to promote electric mobiity by offering financial incentives on purchase of electric vehicles and also creation of electric transportation and charging infrastructure. In order to promote purchase of electric vehicles in India, the Government inserted Section-80EEB in the Income Tax Act, 1961 [Introduced by Finance Act, 2019]. This section is intended to provide deduction to the taxpayers of the interest element of loan taken for purchase of electric vehicle. This section is effective for A.Y. 2020-21 and onwards.
Who is eligible to claim deduction under section-80EEB??
- Only Individual assessees are eligible to claim deduction under section-80EEB.
- Non-Resident Individuals can also claim deduction under this section.
- The benefit of this section can not be claimed by any other assessee namely HUF, Partnership, LLP, Company or AOP.
What is the quantum of deduction under section-80EEB??
- Deduction under this section is allowed only for interest element of loan taken for purchase of electric vehicle.
- Maximum deduction allowable under section-80EEB is Rs. 1,50,000.
Conditions for claiming deduction under section-80EEB??
- Deduction under section-80EEB is allowed if loan is taken for purchase of electric vehicle by the assessee.
- The loan must be taken from any financial institution. (Definition of financial institution given below). If loan is taken from employer, friend or relative, deduction shall not be allowed under this section.
- The loan should have been sanctioned by the financial institution during the period 01-04-2019 to 31-03-2023.
- Such electric vehicle may be taken for personal use or for business purposes.
- If the assessee uses such vehicle for personal use, deduction under section-80EEB shall be available up to Rs. 1,50,000.
- However, if the assessee uses such vehicle for business purposes, deduction shall be allowed up to Rs. 1,50,000 under section-80EEB, excess interest, if any, can be claimed as a business expense.
- The taxpayer should obtain an Interest Certificate from the financial institution for making a claim for deduction under section-80EEB.
What is the meaning of Electric Vehicle??
"Electric Vehicle" means a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.
What is the meaning of Financial Institution??
"Financial Institution" means:
- A Banking Company to which Banking Regulation Act, 1949 applies
- Any bank or banking institution referred to in section-51 of that Act
- Any Deposit taking NBFC
- A systemically important non-deposit taking NBFC [Non-Deposit NBFC having total assets not less than Rs. 500 crore as per the last audited Balance Sheet and which is registered with RBI
