Section 80EEB of Income Tax Act

In the budget for 2019, the government announced the incentive to purchase electric vehicles. The finance minister had said that the advanced battery and registered e-vehicles would be incentivized under the scheme.

A new section 80 EEB had been introduced, which allowed the deduction for the interest paid on the loan that was taken for the purchase of electric vehicles. 

What is Section 80EEB?

The Income Tax Act of 1961's Section 80 EEB focuses on the interest payments made on loans taken out to purchase an electric vehicle for personal or professional use.

Additionally, it works with both two- and four-wheelers. Before the loan is paid off, you can still take advantage of Section 80 EEB deductions.

A deduction of up to 1,50,000 is permitted under Section 80 EEB. You can purchase an electric car for your own usage or for use in your business as an assessee. If you borrowed money to buy an EV for work and the interest paid on that loan is more than 1,50,000 rupees, you can deduct that extra sum from your company expenditures. To do this, though, make sure the company name or the owner of the firm is included on the vehicle's registration.

Eligibility of Section 80EEB of the Income Tax Act

It should be emphasized that only a person will be eligible for deductions under Section 80EEB of the Income Tax Act. This means that no other type of entity, including Hindu Undivided Families, Firms, Companies, Associations of Persons, Limited Liability Partnerships, or Company, may benefit from this new section's provisions.

Terms and Conditions to Claim Section 80EEB Deduction

  • The loan needs to be taken from the financial year and the period of April 1, 2019, to March 31, 2023.
  • The loan should be taken to buy an electric vehicle.
  • The interest that is allowed under 80 EEB will not be offered under any other section. 

Amount of Deduction

Section 80 EEB will allow for a deduction for interest payments up to Rs 1,50,000. An individual taxpayer is allowed to own an electric car for either personal or professional use. The deduction would make it easier for people who own electric cars for personal usage to deduct the interest they paid on their loans.

A person may additionally deduct up to Rs 1,50,000 for business purposes under section 80 EEB. Any interest payments beyond Rs. 1,50,000 may be written off as an expense for the company. The car must be registered in the owner's name or the business enterprise in order to be claimed as a business cost.

Please take note that while completing a return, an individual taxpayer should receive the interest paid certificate and have the appropriate paperwork, including the tax invoice and loan documentation, close to hand.

Benefits of 80EEB Deduction

  • The loan needs to have opted from the bank or mentioned NBFC.
  • The loan has to be sanctioned on 01/04/2019 and 31/03/2023.
  • Only the person can make the deduction in this section.
  • The deduction would not be more than Rs. 1.5 lakhs.
  • Simpler for the purchase of electric vehicles.
  • Electric vehicles are not subject to road tax, and in some states, including Delhi, the registration fee is less expensive.
  • As an older combustion engine with more moving parts that are subject to greater wear and tear than the electric motor, there will be no emissions when there is no fuel, and it will require less maintenance. The electric motor has less than 20 moving parts.
  • Low GST, which was formerly charged at a rate of 12%, is now only 5 per cent.
  • When the RC is renewed after 15 years, a tax will also be applied along with a personal car exemption from the green tax. The green tax will be waived for electric automobiles.

The Promotion of Electric Vehicles

Phase II of the FAME scheme, which aims to encourage the use of electric vehicles throughout the nation, has received approval from the union cabinet. The Indian government has created the FAME (Faster Adoption and Manufacturing of Electric Vehicles) incentive program to encourage the utilization of electric and hybrid vehicles in the nation.

The program's sole goal is to support electric mobility, and it provides financial incentives to purchase them along with the development of the infrastructure for electric transportation and charging.

There are incentives for three-wheelers, four-wheelers, and electric two-wheelers inside the policy. Beginning on April 1, 2019, Phase II of the program will go through March 31, 2022. Phase II is a lengthened variation of Phase I. From April 1, 2019, - March 31, 2022, a total of Rs 10,000 crore would be spent on FAME India Phase II.

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