When it comes to electric vehicles, many leading car makers, from two-wheelers to luxury cars, are involved in trying to design and manufacture models that cater to a wide variety of customers. Electric vehicle buyers in India are exempt from income tax under Section 80EEB of the Income Tax Act.
The states of Tamil Nadu, Karnataka, Telangana, Andhra Pradesh, Delhi, Gujarat, Maharashtra and Meghalaya have announced their policies to welcome and promote electric mobility. The states of Delhi, Gujarat, Meghalaya and Maharashtra in particular have announced concessions for electric vehicle buyers. The southern states of Tamil Nadu, Andhra Pradesh, Karnataka and Telangana have announced product-based incentives. However various offers are waiting for the customers who want to buy an electric vehicle. The most important of which is getting an income tax deduction.
The Indian government has reduced the GST tax from 12 per cent to five per cent, saving a considerable amount on electric vehicle buyers. You can now get an additional tax deduction.
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Under the Indian Income Tax Act, all personal use items and luxury items are not tax deductible. Even if you buy on credit, you will not be able to get the concession or tax deduction. This includes vehicles purchased with credit. However, electric vehicles are currently exempt. This is why a new section has been added to the Income Tax Act. Borrowers of electric vehicles under the 80EEB Act can avail interest free loans up to one and a half lakh rupees per annum. That means you can deduct the interest you pay on the car loan, up to a maximum of ₹ 1,50,000 from gross income. This rule applies to both two-wheelers and four-wheelers.
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Income tax law Who gets this tax deduction under section 80EEB?
Not everyone who buys electric vehicles is exempt from income tax under this section. A few conditions have been imposed for this.
- This exemption only applies to first-time electric vehicle buyers. Income tax deduction is not available if you already have an electric vehicle.
- Must be a buyer of an electric vehicle with a car loan. This exemption does not apply to vehicle buyers who pay in bulk.
- Even if you buy an electric vehicle with a bank loan, you must buy the vehicle by obtaining a loan from an authorized bank and financial institution. EV buyers at non-accredited companies are not eligible for income tax deduction.
- The vehicle must be in the name of an individual, i.e. the vehicle must be owned by an individual. Vehicles purchased in the name of business or partnership are not exempt under this section.
- Although this section was only recently implemented, this offer is available from the 2020-2021 financial year. That means if you have borrowed an electric vehicle since April 2020, you can claim the interest you paid on the loan as income tax deduction.
- This tax deduction is only applicable to electric vehicle borrowers until 31 March 2023.
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