Have you been thinking of buying an electric vehicle lately? In addition to compensate the rising fuel prices, purchasing an electric vehicle shall also give you a tax benefit under income tax.
To promote and encourage the use of electric vehicles by Indians, government of India has introduced a new provision to provide tax benefit to individuals purchasing electric vehicles. Thus, a buyer will benefit from this provision by claiming deduction under section 80EEB of Income Tax Act, for purchasing an electric vehicle from AY 2020-21.
Who can claim deduction?
Deduction under section 80EEB can be claimed only by an individual. Hence, this benefit is not available to HUF, Company or Partnership Firm and any taxpayer other than individual.
When can a deduction under section 80EEB be claimed?
An individual taxpayer can claim a deduction under section 80EEB for any interest paid on loan taken from any financial institution, to purchase any electric vehicle for personal or business use. Such loan taken to purchase any electric vehicle should have been sanctioned by such financial institution during the period beginning from 1st April, 2019 to 31st March, 2023. Also, if such electric vehicle is purchased for the purpose of business, such vehicle should be registered in the name of the business enterprise or the owner of the business. Deduction shall be allowed while computing the total income of an individual from AY 2020-21 and subsequent years. Once the deduction is claimed under this section, such interest cannot be claimed as deduction under any other provisions of the act for any year.
What is the Quantum of Deduction Available?
The deduction allowed under this section shall be the amount of actual interest paid or Rs 1,50,000/- whichever is lower. Thus, the amount of deduction cannot exceed Rs 1,50,000/-
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