Section 80EEB: Deduction on purchase of an Electronic Vehicle

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Deduction on purchase of an Electronic Vehicle

In the Union Budget of 2019, the government announced an offer to buy an electric car. In a budget speech, the finance minister said improvements to batteries and e-vehicles registered under the scheme would be developed. A new section 80EEB has been introduced that allows for deductions from interest on borrowed loans for the purchase of electric vehicles from AY 2020-21. This article will discuss the deduction on the purchase of an electronic vehicle.

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Eligibility criteria

Money deducted under this category is available only to individuals. The deduction on the purchase of the electronic vehicle is not available to any other taxpayer. Therefore, if you are a HUF, AOP, firm, company, or any other type of taxpayer, you may not be able to claim a profit under this category.

Deduction on the purchase of the electronic vehicle

Deductions for interest payments up to Rs 1,50,000 are available under Section 80EEB. Each taxpayer may own an electric car for personal or business use. These deductions will make it easier for people who own an electric car to use it to earn interest on a car loan.
In the case of a business transaction, a person may also claim a deduction of up to Rs 1,50,000 under section 80EEB. Any interest payments above Rs 1,50,000 may be claimed as business expenses. To apply as a business expense, the vehicle must be registered in the name of the owner or business owner.
Note that each taxpayer must obtain a tax-payable certificate and keep the required documents such as tax invoices and loan documents nearby at the time of filing a return.

Claim for a deduction on the purchase of the electronic vehicle

  • The loan must be taken from a financial institution or a non-bank finance company to purchase an electric car.
  • The loan must be repaid at any time during the period from 1 April 2019 to 31 March 2023.
  • “Electric vehicle” is defined as a motor vehicle powered by an electric motor only whose power supply is provided by a towable battery installed in the vehicle and with a renewable electric brake system, which during braking provides the conversion of the kinetic energy of the vehicle into electrical energy.

Electric vehicle mobility solution promotion

The union cabinet has approved a Phase II accreditation program to promote electricity generation in the country. FAME (Faster Adoption and Manufacturing of Electric Vehicles) is an Indian government initiative to promote electric and hybrid vehicles in the country.
The main purpose of the program is to promote the flow of electricity and the program provides financial incentives for the purchase of electric vehicles and the creation of electricity transport and charging infrastructure.
Under this program, incentives are available for 3 Wheelers, 4-wheelers, and 2 electric wheelers. Phase II of this program started on 1 April 2019 and will be completed by 31 March 2022. Phase II is an extended first-phase program. FAME India Phase II has a total release of Rs 10000 crores over 3 years from 1 April 2019 to 31 March 2022.

Personal ITR filing for indiaviduals

Final words

The Section 80EEB draw has been introduced to improve the flow of electricity in India. The main goal is to provide financial incentives for the purchase of electric vehicles and thus increase their demand. So, even though electric cars are already offering countless environmental benefits, the government is trying to force people to buy these cars by offering benefits such as tax exemptions from paying interest on loans.

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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