Section 80EEB - Deduction On Purchase Of Electric Vehicle

  • Author :
  • TATA AIG Team
  • Published on :
  • 01/12/2023

Two-wheelers and four-wheelers are the most preferred way of transportation today. With the increasing use of vehicles, various innovations were introduced, too. One such significant development in the automobile industry was the introduction of electrical motorcycles. Currently, a few car manufacturers have launched electronic versions of their models.

Electric vehicles provide a myriad of benefits to the customers. They are convenient, highly effective, low maintenance, and have cheap running costs. Despite the benefits that electric vehicles offer, people have not accepted electric vehicles with all their hearts yet. One of the key reasons why electric vehicles are not fully welcomed can be the purchase price of the electrical vehicle.

To provide access to electric vehicles to all the people in society, many banks started providing loans to everyone to buy an electric vehicle. To encourage people to take these loans, the government of India and the Income tax department introduced section 80 EEB in the year 2019.

Let us have a detailed look at this section of the Indian Income Tax Act.

What Is Section 80 EEB

80 EEB is a tax deduction given to eligible persons on the interest on a loan taken to purchase an electric vehicle. This electric vehicle deduction 80 EEB is allowed to people on their taxable income under the Income Tax Act.

The amount shall be deducted from the taxable income of the assessee before calculating the tax along with all other deductions allowed under chapter VI A. This tax exemption on electric vehicles is allowed for the interest paid on the loan taken but not on repayment of the loan.

So if you take a loan of ₹1,00,000 for the purchase of the electric vehicle, at an interest of 5%, you will pay an interest of ₹5000 which shall be allowable to be deducted from income under section 80 EEB.

How can you claim a Deduction under section 80 EEB?

Deduction under section 80 EEB can be availed while filing your income tax return.

If you are filing your tax returns, you will find the option of deduction under Chapter VI A after filing all the details of the heads of income. Here you need to specify details like date of sanction, amount of loan, rate of interest, amount of interest, etc.

If you are filing your return via a Chartered Accountant or with the help of a certified tax practitioner, you need to inform him/her of the details of the loan beforehand.

What are the Conditions to Claim Deduction Under Section 80 EEB

One can claim easily claim deduction under section 80 EEB subject to the following conditions:

  • The person has to be an eligible assessee.

  • An eligible assessee is any person who has taken a loan from any financial institution or bank for the purchase of electric vehicles.

  • The amount received from raising a loan should be utilised only for the purchase of electric vehicles.

  • If any amount of the loan is utilised for purposes other than buying an electric vehicle, the interest amount shall not be eligible for electric bike tax exemption.

  • The loan should be applied for and sanctioned in the period between 1st April 2019 and 31st March 2020.

  • Any loan approved for the purchase of vehicles before or after the above-mentioned period shall not be eligible for deduction under section 80 EEB.

  • The loan should be taken from a financial institution like a bank or a specified NBFC (Non-Banking Financial Institution).

  • A financial institution includes a banking company, a bank, a non-banking financial company accepting deposits, and a systemically important non-deposit-taking Non-Banking Financial Institution.

What is the maximum eligible amount under section 80 EEB

Interest of up to only ₹1,50,000 can be allowed as a deduction.

If the interest amount exceeds ₹150,000 it will be taxable under the Income Tax Act. This is the annual limit of interest paid and not the monthly limit. Also, 80EEB cannot be claimed if interest on the loan is not paid.

Who is Eligible to Claim Deduction Under Section 80 EEB?

All eligible persons are allowed a deduction under section 80 EEB. To claim an 80EEB deduction, you should fulfil the following conditions:

  • The assessee should have an electric vehicle for personal or business use.

  • The assessee should not be a person other than an individual.

For example, Mr. Desai who is an individual and has an electric scooter can claim a deduction under section 80 EEB. But Amrut ltd. who is a listed public company, is not allowed to claim a deduction under 80 EEB.

Similarly, HUFs, associations of persons, and bodies of individuals too, are not eligible for deduction under section 80 EEB.

Impact of 80EEB On Other Deductions

There are many deductions available under Chapter VI A like 80 C, 80 CC, 80 JJAA, 80 QQB, 80 E, and 80 EEA. One of the most prominent sections under Chapter VI A is section 80C.

Section 80C allows deduction on an expenditure made on certain investments like contribution to unit-linked policies, premium paid for the life insurance policy, contribution to provident fund, etc.

It is important to note that section 80 EEB does not form part of section 80C and thus interest on a loan taken to buy an electric vehicle shall not be eligible for deduction under section 80C.

Secondly, taking a tax rebate on electric vehicles under section 80 EEB of the Income Tax Act does not put restrictions on demanding deductions under other sections. But it is to be remembered that interest which is allowed under section 80 EEB shall not be claimed under any other sections.

That is, if a person has a deduction of interest under 80 EEB, he shall not be allowed to claim any deduction under any provision, like the deduction for expenditure for payment of the loan. This shall be applied to the current year as well as to the upcoming assessment years.

When Can you Claim Deduction Under Section 80 EEB?

This deduction can be claimed from the Assessment Year 2020-21 or the Previous Year 2019-20. It can be claimed up to the repayment of the loan.

Let us understand this by an example. Suppose Ms. Shruti wants to buy an electric bike and take a loan for the same. She applied for and got her loan sanctioned between 1st April 2019 and 31st March 2020. She has to repay her loan before 2027. She will get an exemption of interest for all the previous years until 2027 and assessment year 2028.

In Conclusion

80EEB in income tax is an important section that provides you with tax benefits on the purchase of motor vehicles. Saving money since the start of small habits like these can help you in the long run.

Buying an electric vehicle can be empowering and it can save you time and money as well. To ensure that this valuable purchase of yours remains safe and any mishap with it does not cost a fortune, do buy bike insurance that shall help you value your valuables.

Check out Tata AIG's wide range of insurance for 2-wheelers. You can also easily compare two-wheeler insurance policies online to assess which bike insurance policy suits you the best.

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