In order to promote the electric vehicles in the country as a measure to combat the rising pollution the Union Budged of 2019 was the announcement from the government of India to provide an incentive for the purchase of an electric vehicle. During her budget speech, the Finance Minister announced that vehicles with advanced batter and registered e-vehicles will be incentivized under the scheme. A new section 80EEB was introduced which allows a deduction for interest paid on the loan amount taken for the purchase of electric vehicle starting from the assessment year 2020 – 2021.
Amount of deduction available under Section 80EEB
A deduction for interest payments up to Rs1,50,000 is available under Section 80EEB. An individual taxpayer may have an electric vehicle for personal use or for business use. This deduction would facilitate individuals having an electric vehicle for personal use to claim the interest paid on the vehicle loan.
In case of business use, an individual can also claim the deduction up to Rs1,50,000 under section 80EEB. Any interest payments above Rs1,50,000 can be claimed as a business expense. To claim as a business expense, it is necessary that the vehicle should be registered in the name of the owner or the business enterprise.
Do note that an individual taxpayer should obtain the interest paid certificate and keep the necessary documents such as tax invoice and loan documents handy at the time of filing of the return.
The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.
Conditions for claiming the deduction
The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.
The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.
“Electric vehicle” has been defined to mean a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.
Once the deduction concerning the interest amount has been claimed under Section 80EEB, no further deduction can be claimed for such interest payment under any other provisions of the Act for the same or any other assessment year.
Promotion of Electric Vehicle in India
The union cabinet has approved Phase-II of FAME scheme for promotion of electric mobility in the country. The Faster Adoption and Manufacturing of Electric Vehicles (FAME) is an incentive scheme promoted by the government of India for boosting electric and hybrid vehicles across the nation. The ultimate objective is to promote electric mobility and the scheme offers financial incentives for the purchase of electric vehicles and the creation of electric transportation and charging infrastructure.
As per the scheme, incentives are available on purchase of 2-wheeler, 3-wheeler, 4-wheeler electric vehicles. Phase II of the scheme has started from April 1, 2019, and it will be completed by March 31, 2022. Phase II is an expanded version of the first phase. FAME India Phase II has a total outlay of Rs10000 crores spread for 3 years between April 1, 2019, till March 31, 2022.