To promote the electric vehicles in the country as a measure to combat the rising pollution the Union Budged of 2019 was the announcement from the government of India to provide an incentive for the purchase of an electric vehicle. During her budget speech, the Finance Minister announced that vehicles with advanced batter and registered e-vehicles will be incentivised under the scheme. A new section 80EEB was introduced which allows a deduction for interest paid on the loan amount taken for the purchase of electric vehicle starting from the assessment year 2020 – 2021.
As per this section, individuals can avail for a deduction amount of up to Rs 1,50,000 per annum on payment of interest on a loan secured for the purchase of an electric vehicle. The electric vehicle can either be purchased for individual use or business purpose. This deduction will facilitate individuals who are owning an electric vehicle for personal use to claim the interest paid on the vehicle loan.
If the vehicle is meant for business use, then he can still claim for deduction of up to Rs 1,50,000 under Section 80EEB. Any interest payments made above Rs 1,50,000 per annum can be claimed as a business expense. To do so, the vehicle must be registered in the name of the owner of the business enterprise.
Please Note: Individual taxpayers should obtain interest paid certificate and keep all the necessary documents such as tax invoice and loan documents handy at the time of filing of the Income Tax returns.
The said deduction is available only to the individuals and cannot be availed by any other taxpayer. If the taxpayer is a firm, HUF, AOP, company and so on, they are not eligible to claim any benefit under this section.
Conditions for claiming for deduction under Section 80EEB
The rise in air pollution at an alarming rate has forced the government of India, to take strong steps to promoted electric vehicles in the country. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) is an incentive scheme promoted by the government of India for boosting electric and hybrid vehicles across the nation. The ultimate objective is to promote electric mobility and the scheme offers financial incentives for the purchase of electric vehicles and the creation of electric transportation and charging infrastructure. As per the scheme, incentives are available on purchase of 2 wheeler, 3 wheeler, 4 wheeler electric vehicles.
Phase II of the scheme has started from April 1, 2019, and it will be completed by March 31, 2022. Phase II is an expanded version of the first phase. FAME India Phase II has a total outlay of Rs 10000 crores spread for 3 years between April 1, 2019, till March 31, 2022.