Know Income Tax benefit on buying Two wheeler and Four wheeler electric vehicle on loan
The government has offered an incentive for buying electric vehicles in the Union Budget for 2019. The finance minister indicated that the programme will offer incentives for sophisticated batteries and registered electric vehicles. With effect from the AY 2020–21, a new section 80EEB has been implemented that permits a deduction for interest paid on loans obtained for the purchase of electric cars. The interest payments made on loans taken out to buy an electric vehicle for personal or professional usage are the subject of Section 80 EEB of the Income Tax Act of 1961.
It also functions with both two-wheelers and four-wheelers. Section 80 EEB deductions are still available up until the debt is paid off. Section 80 EEB allows for a deduction of up to 1,50,000. You have the option to buy an electric vehicle for personal use or to use for business purposes as an assessee. You may deduct the extra money from your business expenses if you took out a loan to acquire an Electric Vehicle for work and the interest paid was more than 1,50,000 rupees. To do this, however, ensure that the name of the business or its proprietor is listed on the vehicle’s registration.
Who are eligible to claim deduction under 80EEB?
The deduction under section 80EEB is available to individuals only. Other taxpayers are not eligible for this deduction. Therefore, you are not eligible to make a claim under this provision if you are a HUF, AOP, partnership business, corporation, or any other type of taxpayer.
What are the conditions for claiming the deduction under 80EEB?
The following are the various conditions for claiming deduction under 80EEB:
- 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.
What is the amount of deduction under section 80EEB?
A deduction for interest payments up to Rs 1,50,000 is permitted under Section 80EEB. Individual taxpayers are permitted to possess electric vehicles for either personal or business usage. People who own electric vehicles for personal use would find it simpler to deduct the interest they paid on their loans thanks to the deduction.
Additionally, under section 80 EEB, a person may deduct up to Rs 1,50,000 for commercial activities. Beyond Rs. 1,50,000 in interest payments, the corporation may write it off as a cost. To be deducted as a business expense, the vehicle must be registered in the name of the owner or the firm.
Please note that an individual taxpayer filing a return should have the interest-paid certificate and have the relevant papers on hand, including the tax invoice and loan documentation. The assessee will be able to claim the Income Tax deduction under 80EEB until the loan taken out to purchase an electric car has been fully redeemed.
Below is the Instances of benefit from section 80EEB:
Where the assessee buys a two wheeler by taking loan of Rs. 1,00,000 at the rate of 10%, the following are the interest outgo and tax benefit received.
| Loan amount of Rs. 1 Lac | Total EMI | Amount of Principal | Amount of Interest | Amount of Tax Saved |
| 1st Year | 25,284 | 16,225 | 9,059 | 2,718 |
| 2nd Year | 25,284 | 17,923 | 7,361 | 2,208 |
| 3rd Year | 25,284 | 19,801 | 5,483 | 1,645 |
| 4th Year | 25,284 | 21,876 | 3,408 | 1,022 |
| 5th Year | 25,284 | 24,165 | 1,119 | 336 |
| Total | 1,00,000 | 26,430 | 7,930 |
Where the assessee buys a four wheeler by taking loan of Rs. 15,00,000 at the rate of 10%, the following are the interest outgo and tax benefit received.
| Loan amount of Rs. 15 Lac | Total EMI | Amount of Principal | Amount of Interest | Amount of Tax Saved |
| 1st Year | 3,79,284 | 2,43,402 | 1,35,883 | 40,765 |
| 2nd Year | 3,79,284 | 2,68,889 | 1,10,397 | 33,119 |
| 3rd Year | 3,79,284 | 2,97,047 | 82,243 | 24,673 |
| 4th Year | 3,79,284 | 3,28,149 | 51,136 | 15,341 |
| 5th Year | 3,79,284 | 3,30,905 | 16,761 | 5,028 |
| Total | 18,96,420 | 15,00,000 | 3,96,420 | 1,18,930 |
Below are some FAQs related to section 80EEB?
1. Can HUFs take the advantage of deductions under Section 80 EEB?
The deduction under section 80EEB is available to individuals only. Thus, HUFs are not covered by Section 80 EEB;
2. Can the assessee take the deduction for the principal amount of a loan repayable under section 80EEB?
Section 80EEB provision only allows for a deduction in relation to interest payments.
3. What are the documentation to be provided to the employer in order to get section 80EEB benefits?
In order to claim deduction under 80EEB a bank interest certificate must be given to the employer. Provisional interest certificates can also be offered as proof to support a deduction claim.
4. How much is the maximum deduction under Section 80 EEB?
The assessee can claim a maximum deduction of R. 1,50,000.
