In the Union Budget 2019, the Finance Minister of India has announced an incentive for the purchase of electronic vehicles. A new deduction under section 80EEB has been recently inserted in the Income Tax Act, 1961 by the Government. The aim of inserting this section is to promote usage of electric vehicles and reduce vehicular pollution in the country.
The benefit under section 80EEB can be claimed only by an individual. Thus, the following assessees are not eligible to avail the benefit under this deduction.
- Partnership firm,
- a company,
- or any other kind of taxpayer.
Applicability of section 80EEB:
This section will come into effect from 1st April 2020. So, it will be allowed while computing the individual’s total income for the assessment year 2020-21 and subsequent years.
Maximum amount of Deduction:
The maximum amount of deduction under this section shall be the lower of the following amounts:
- Actual Amount of interest payable on the loan for a year,
Conditions for Section 80EEB:
To claim the deduction under section 80EEB, the following conditions must be satisfied by an individual:
- This deduction is applicable to an individual who is having an electronic vehicle for either personal or business use.
- Only the amountof interest paid on the vehicle loan is eligible for deduction under this section.
- The loan must be taken from a financial institution (banks, NBFCs, etc.) or a non-banking financial company.
- The loan must have been approved or sanctioned from the period between 1 April 2019 till 31 March 2023.
- If payment in respect of loan exceeds Rs. 1,50,000, such excess amount shall be treated as a business expense. For this, it is mandatory that the vehicle is registered in the name of the owner or the business enterprise.
- The deduction is available to all kind of individual businesspersons, including salaried employee.
- It is not required that the vehicle is used by the assessee himself. If the vehicle used by any relative, family member or any other person, the same can be claimed as deduction.
- Unless otherwise satisfied, this section applies to both resident as well as a non-resident individual.
- The deduction under section 80EEB is over and above Rs. 1.5 lakh deduction provided under section 80C, 80D, 80CCD.
- This deduction is not available for interest payable under any other provisions of the Act for any assessment year.
- The amount of deduction will be available only till the date of repayment of the loan.
- This deduction applies only if the deduction for interest is not claimed under any other provisions of the Act. This means that double deduction is not allowed to the assessee under any case.
- On the date of approval of loan, the individual must not be the owner of any other electric vehicle.
- The deduction is available to 4 wheeled as well as 2 and 3 wheeled electric vehicles.
However, the price of electric vehicles is relatively high as compare to non-electric vehicles. Also, the maintenance, infrastructure, and availability of charging station is an issue for the consumers.