An EV can give you income tax benefits, but there's a catch. Know here

The Government of India has introduced a new section in the Income Tax Act, the 80EEB, which offers EV owners a benefit of up to ₹1.5 lakh every fina
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The all-electric Hyundai Ioniq 5, launched earlier this year at Auto Expo 2023, is the second electric offering from the automaker in India.
The price of Ioniq 5 stands at <span class='webrupee'>₹</span>44.95 lakh.
The automaker informs the electric car has already received over 650 bookings and deliveries will begin in March.
The vehicle is based on Hyundai's Electric-Global Modular Platform (E-GMP).
The electric car is powered by a PMS motor which is mounted on the rear axle. It comes with a 72.6 kWh battery pack and promises range up to 631 km.
It generates a power output of 214 bhp and 350 Nm of torque.
The interior comes with 12.3-inch dual screens with Hyundai's latest interface. 
Features such as Level 2 ADAS, Bose sound system along with dual-zone climate control are available. 
The electric car also offers ventilated seats.
Hyundai shares the other accessories used in the interior come from sustainable materials.
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EV buyers can claim up to ₹1.5 lakh income tax deduction on the interest paid for vehicle loans under section 80EEB of the IT Act.
The all-electric Hyundai Ioniq 5, launched earlier this year at Auto Expo 2023, is the second electric offering from the automaker in India.
1/10
The all-electric Hyundai Ioniq 5, launched earlier this year at Auto Expo 2023, is the second electric offering from the automaker in India.
The price of Ioniq 5 stands at <span class='webrupee'>₹</span>44.95 lakh.
2/10
The price of Ioniq 5 stands at 44.95 lakh.
The automaker informs the electric car has already received over 650 bookings and deliveries will begin in March.
3/10
The automaker informs the electric car has already received over 650 bookings and deliveries will begin in March.
The vehicle is based on Hyundai's Electric-Global Modular Platform (E-GMP).
4/10
The vehicle is based on Hyundai's Electric-Global Modular Platform (E-GMP).
The electric car is powered by a PMS motor which is mounted on the rear axle. It comes with a 72.6 kWh battery pack and promises range up to 631 km.
5/10
The electric car is powered by a PMS motor which is mounted on the rear axle. It comes with a 72.6 kWh battery pack and promises range up to 631 km.
It generates a power output of 214 bhp and 350 Nm of torque.
6/10
It generates a power output of 214 bhp and 350 Nm of torque.
The interior comes with 12.3-inch dual screens with Hyundai's latest interface. 
7/10
The interior comes with 12.3-inch dual screens with Hyundai's latest interface. 
Features such as Level 2 ADAS, Bose sound system along with dual-zone climate control are available. 
8/10
Features such as Level 2 ADAS, Bose sound system along with dual-zone climate control are available. 
The electric car also offers ventilated seats.
9/10
The electric car also offers ventilated seats.
Hyundai shares the other accessories used in the interior come from sustainable materials.
10/10
Hyundai shares the other accessories used in the interior come from sustainable materials.

As the current financial year is nearing its end, taxpayers' worries are growing about how to save more and get the best benefit while filing income tax returns. While some clauses in the Income Tax Act offer tax exemption to the return filers, buying a vehicle and the related loan doesn't provide them with any relief. However, to promote electric mobility in India, the central government has introduced a new section to the IT Act, 80EEB, through which electric vehicle buyers who are availing of a loan to purchase an EV can avail of benefits of up to 1.5 lakh.

Here are all the details you would like to know about 80EEB.

Also Read : How to keep electric car charging costs down: Key useful tips

What is 80EEB?

The 80EEB is a section of the Income Tax Act, specially curated for electric vehicle buyers who avail of vehicle loans to purchase an EV. This section allows an individual taxpayer to claim a deduction of up to 1.5 lakh on the interest component of the vehicle loan taken to purchase the EV. Under this section, each taxpayer can claim a maximum deduction of 1.5 lakh only once in one assessment year. The benefits are available only for individual taxpayers, not for companies or businesses.

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Key details of 80EEB benefit

To avail of the benefit of the 80EEB section of the Income Tax Act, the beneficiary has to be an individual taxpayer, not any business or company. The EV can be used for personal use or business, though. The benefit is available only for those individuals who are purchasing the EV by opting for a vehicle loan, which must be taken between 1st April 2019 and 31st March 2023.

If the buyer uses the electric vehicle for business use and the interest paid on the vehicle loan exceeds the 1.5 lakh threshold in one financial year, it can be shown as a business expense. However, to avail of that benefit, the vehicle must be registered in the name of the business owner. The loan must be taken from a financial institution such as a bank or an NBFC.

The section 80EEB deduction limit is set at 1.5 lakh per annum. One cannot claim further deduction under any provision of the IT Act. The deduction is available only once to a taxpayer in a single financial year and is available for those buyers who have purchased an EV for the first time. The benefit is available for electric two-wheelers and four-wheelers.

Calculating the deduction amount under 80EEB

If you buy an electric car priced at 22 lakh and avail of a vehicle loan of 20 lakh at an interest rate of 10 per cent per annum to purchase that from a registered bank or NBFC, the interest payable on the loan will be 2 lakh. Under section 80EEB, you can claim a 1.5 lakh deduction on the 2 lakh interest paid to the lender. However, the remaining 50,000 will be taxable.

First Published Date: 19 Feb 2023, 10:35 AM IST
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