80EEB: Deduction for the Interest payable for purchase of Electrical Vehicle

To promote the use of electric vehicles in India, the Indian Government has introduced a new deduction in respect of Interest payable for electric vehicles.

Applicability

• Loan has been taken for the purchase of electrical vehicle.
• Loan has been availed from bank or non-Banking financial company or any other financial institution.
• Loan has been sanctioned by the financial institution during the 01/04/2019 - 31/03/2023.

Who are eligible for this deduction?

The Deduction is only available to individual taxpayers under the old tax regime, 

Who are ineligible for this deduction?

Section 80EEB is not applicable to other entities like HUFs, AOPs, firms, or companies.

Amount of Deduction

Deduction can be claimed lower of;

• Interest Payable on loan for purchase of electrical vehicle; or
• Rs.1,50,000/-

For the purpose of deduction;

"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.

"financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act and includes any deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company as defined in clauses (e) and (g) of Explanation 4 to Section 43B.]

FAQs

From where loan must be obtained obtained?

The loan must be obtained from either a bank or a specified Non-Banking Financial Company.

What is the specific purpose of this deduction?

This deduction is specifically designed for the purchase of electric vehicles.

What type of benefit is provided regarding road tax?

Electric vehicles are exempt from road tax.

How does this deduction affect registration fees in certain states?

In certain states, including Delhi, a lower registration fee is applicable for electric vehicles.

How has the GST rate for electric vehicles been modified?

The GST rate for electric vehicles is reduced to 5% from 12%.

What will happen upon renewal of registration certificates after 15 years for electric cars?

Upon renewal of registration certificates after 15 years, electric cars are exempt from the green tax.