With the increase in Income among the vast population in India, people are into purchasing commodities and other luxury items for the sake of convenience and comfort. One of the industries that have seen a huge increase in demand is the automobile Industry.
People are purchasing vehicles for the sake of travel convenience and affordability. Middle and lower-middle class are also buying vehicles because of the affordability Factor. If one cannot pay cash right away, banks and other financial institutions including motor vehicle services are Offering loan for the purchase.
Section 80EEB of the income tax Act is a provision to help with reducing the interest rates for registered taxpayers.
Section 80EEB is a provision where you can claim Deduction on interest for the purchase of an electric vehicle. It was introduced for the first time in the Finance Act, 2019. Electric vehicles for domestic use include cars, bikes, scooters, electric bicycles and such.
In the budget speech, the Finance minister, Nirmala Sitharaman, stated that advanced battery and registered e-vehicles will be covered under this scheme. It allows the deduction for interest paid on the loan taken for the purchase of electric vehicles from the AY 2020-2021.
This scheme is available for personal and business purposes. The deduction is available until the full repayment of the loan amount and both the four-wheelers and two-wheelers can receive the aforementioned benefit.
The eligibility criteria under this section are in favour of individuals. This means that the deduction option is available to individuals only. It is not allowed for other registered taxpayers like hindu undivided family (HUF), Partnership Firms, AOP, company or any other taxpayers.
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The deduction amount for interest payments under Section 80EEB is
Rs. 1,50,000. You can claim this deduction for interest paid on electric vehicles for personal use.
If you are purchasing a vehicle for business then, you can claim a deduction above Rs. 1,50,000. For interest payments above, it is necessary that the vehicle be registered under the name of the owner of the business.
Remember to obtain and preserve the interest paid certificate and other necessary documents like tax invoice and loan documents ready with you when filling the return form.
The conditions to be eligible for claiming the deduction under Section 80EEB is mentioned below:
In order to be eligible to get the deduction, you should have borrowed the loan from a financial institution of a non-banking financial company.
Your loan should have been sanctioned anytime during the period between April 1, 2019, to March 31, 2023, to get the benefit under this scheme.
Take into consideration the type of vehicle which is eligible under the provisions of this scheme. ‘Electric Vehicle’ in this category means a vehicle that is powered only by an electric motor with traction energy being supplied to the traction battery installed in the vehicle and has such an electric regenerative braking system. This system provides the conversion of vehicle kinetic energy into electrical energy during applying brakes.
The Government of India introduced the Faster Adoption and Manufacturing of Electric Vehicles (FAME). This was launched with the goal of promoting electric and hybrid vehicles in the country. The union cabinet has also approved the second phase of the scheme on April 1, 2019. The scheme is set to be completed by March 31, 2022. FAME India Phase 2 has an outlay of
Rs. 10,000 crores over a period of 3 years.
The main goal of the scheme is to promote electric mobility and to help the scheme offer financial incentives for the purchase of an electric vehicle and electric transportation.
Under this scheme, the incentives are available for three-wheelers, four-wheelers and electric two-wheelers.
The section 80EEB is a boon for the travelling masses in India. People travelling to work and other places of importance can truly benefit from this scheme at a personal level. Businesses can make complete use of this scheme and save much money on interest paid on official vehicles.