What is the tax break given on purchase of electric vehicles?

There are provisions in the 2019-20 budget for tax breaks on electric vehicles. What are those?

Features of Section 80EEB

a) Eligibility criteria
The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.

b) Amount of deduction
A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEB. An individual taxpayer may have an electric vehicle for personal use or for business use. This deduction would facilitate individuals having an electric vehicle for personal use to claim the interest paid on the vehicle loan.

In case of business use, an individual can also claim the deduction up to Rs 1,50,000 under section 80EEB. Any interest payments above Rs 1,50,000 can be claimed as a business expense. To claim as a business expense, it is necessary that the vehicle should be registered in the name of the owner or the business enterprise.

Do note that an individual taxpayer should obtain the interest paid certificate and keep the necessary documents such as tax invoice and loan documents handy at the time of filing of the return.

Conditions for claiming the deduction

The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.
The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.
“Electric vehicle” has been defined to mean 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.

2 Likes