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Section 80EEB- Deduction in respect of the purchase of an electric vehicle

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In the Union Budget 2019, the government has declared an incentive for purchasing electric vehicles. The finance minister has announced that advanced batteries and registered e-vehicles will be incentivized under the scheme in the budget oration. In addition, a new section 80EEB has been introduced, allowing a deduction for interest paid on loans taken for the procurement of electric vehicles from the A.Y. 2020-21.

Features of Section 80EEB
Eligibility criteria
Deduction under Section 80EEB is available only to individuals. Therefore, this deduction is not obtainable to any other taxpayer. Thus, if you are a HUF, AOP, partnership firm, company or any different type of taxpayer, you cannot assert any benefit under this section. 

Amount of deduction
The deduction for interest payment shall not exceed Rs.1, 50,000 under the scheme. An independent taxpayer may have an electric vehicle for personal use or business use. This deduction would ease individuals having an electric vehicle for personal use to assert the interest paid on the vehicle loan. 

In case of business use, a person can also claim the deduction of up to Rs. 1, 50,000 under section 80EEB. In addition, any interest payments above Rs 1, 50,000 can be claimed as a business expense provided that the vehicle should be registered in the name of the owner or business enterprise.

An individual taxpayer should acquire the interest paid certificate and keep the important documents such as tax invoice and loan documents handy at the time of filing the return.

Conditions for claiming the deduction

  • The loan must be availed from a non-banking financial company or a financial institution for purchasing an electric vehicle.
  • The financial institution must sanction the loan from 1 April 2019 till 31 March 2023.
  • “Electric vehicle” has been explained to mean a vehicle which is powered exclusively by an electrical motor whose traction energy is supplied solely by traction battery installed within the vehicle and has such electric regenerative braking system, which throughout braking provides for the conversion of vehicle kinetic energy into electrical energy.

Promotion of electric vehicle mobility solution
The union cabinet has accepted phase-II of the FAME scheme to promote electric mobility in the country. The faster adoption and processing of electric vehicles (FAME) is an incentive scheme of the govt. of India for the promotion of electric and hybrid vehicles in the country. 

The ultimate goal of the scheme is to boost electric mobility, and the scheme provides financial incentives for the procurement of electric vehicles and the creation of electric transportation and charging infrastructure.

Under this scheme, the incentives are available for three-wheelers, four-wheelers and electric two-wheelers. The Phase-II of the scheme has started on 1 April 2019 and will be completed by 31 March 2022. Phase-II is an expanded version of phase-I.  FAME India phase II has a gross outlay of Rs 10000 crores over three years, from 1 April 2019 to 31 March 2022.

At AJSH, we assist our clients in dealing with various income tax compliances, including income tax assessments, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about section 80EEB, kindly contact us.


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