Introduction:

Under Section 80 EEB of the Income Tax Act, you’re eligible to avail tax deduction benefits of up to ₹1.5 lakh on the interest paid towards a loan specifically taken for the purchase of an electric vehicle. However, meeting specific terms and conditions related to the loan issuer and the electric vehicle is necessary to qualify for the 80EEB deduction.

Section 80 EEB:

Section 80EEB of  Income Tax Act enables you to avail tax savings of up to Rs 1.5 lakh on the interest paid for a loan intended specifically for purchasing an electric car. However, adherence to specific restrictions and conditions regarding the loan issuer and the electric vehicle is imperative to qualify for the 80EEB deduction.

Meaning of Electric Vehicle:

You also need to secure an auto loan for purchasing an electric vehicle from a recognized financial institution.

• A vehicle propelled simply by an electric motor.
• Whose traction energy is solely supplied by the traction battery installed within the vehicle.
• The vehicle is equipped with an electric regenerative braking system that converts kinetic energy into electrical energy during braking.

Eligibility criteria:

To qualify for the Section 80EEB deduction, you must satisfy the following eligibility criteria:

• Only individuals are eligible to claim tax deductions under Section 80EEB, meaning Hindu Undivided Families (HUFs), Association of Persons (AOPs), Partnership firms, companies, or any other entity are not eligible.
• It was necessary for the loan to be approved between April 1, 2019, and March 31, 2023.
• Only loans from approved banks and NBFCs will be considered for the rebate.
• The loan must be exclusively utilized for the purchase of an electric vehicle.

Deduction Amount  under Section 80EEB:

• If the electric vehicle is used for business purposes, an individual can claim a deduction of up to Rs 1,50,000 under section 80EEB. Any interest payments exceeding Rs 1,50,000 can be claimed as a business expense. To qualify as a business expense, it is essential for the vehicle to be registered in the name of either the owner or the business enterprise.
• Under Section 80EEB, individuals can claim a deduction for interest payments up to Rs 1,50,000. Whether an individual taxpayer uses an electric vehicle for personal or business purposes, this deduction allows them to claim the interest paid on the vehicle loan, thereby encouraging the adoption of electric vehicles for personal transportation needs.
• Please ensure that, as an individual taxpayer, you obtain the interest-paid certificate and keep all necessary documents, including tax invoices and loan documents, readily available for filing your tax return.

Condition to Claim Deduction: 

If you intend to claim a Section 80EEB deduction, it’s essential to adhere to the following conditions:

• The Section 80EEB deduction limit is capped at Rs. 1.5 lakh per annum, and no further deductions can be claimed under any provision of the Income Tax Act.
• You are eligible to claim this deduction benefit solely if you are financing the purchase of an electric vehicle for the first time.
• It was necessary for the loan to be approved between April 1, 2019, and March 31, 2023.
• You also need to secure an auto loan for purchasing an electric vehicle from a recognized financial institution.

Who can Claim Deduction : 

Section 80EEB permits a deduction solely for individuals who take out loans for the purchase of EVs. Consequently, the deduction under Section 80EEB cannot be claimed by:

• Partnership firms
• Association of Persons 
• Body of Individuals
• Company
• Hufs

Documents Required to Claim Deduction:

To claim the tax benefit under Section 80EEB, the following documents are required:

• The assessee should have the Certificate of Interest Paid on the loan obtained for the electric vehicle.
• The assessee should ensure that other documents related to the loan are readily available.
• The assessee should possess a valid tax invoice obtained at the time of purchasing the EV.

Promoting Electric Mobility : 

India launched the Faster Adoption and Manufacturing of Electric Vehicles (FAME) incentive program, with the Union Cabinet approving Phase II. This initiative aims to bolster the widespread adoption of Electric Vehicles (EVs) across the nation, promoting electric mobility in India. The program offers financial incentives for EV purchases and facilitates the development of essential charging infrastructure to support EV transportation.

Final Word: 

The Section 80EEB tax deduction benefit plays a crucial role in driving the increasing popularity of electric vehicles among the common people in India. This tax rebate not only promotes an environmentally sustainable future but also enables eligible taxpayers to optimize their tax savings beyond traditional exemptions such as Section 80C and 80D.