Section 80EEB:Deduction for Interest paid on loan taken for purchase of Electric Vehicle

Union Budget 2019, the Finance Minister has proposed an additional deduction of Rs. 1.50 lakh for interest paid on loans taken for purchase of electric vehicle from the financial year 2019-20. This additional deduction of interest will qualify under the newly introduced section 80EEB.  

The deduction is available only to an individual. This deduction is not available for HUF, AOP, Partnership firm, a company, or any other assesse.

The deduction will be available under section 80EEB up to Rs. 1.50 lakh for interest payment. An electric vehicle can be purchased for personal use or for business use.

• In case of personal use, an individual can claim the deduction up to Rs. 1.50 lakh.
• In case of business use, an individual can also claim the deduction up to Rs 1,50,000. Any interest payments above to Rs. 1,50,000 can be claimed as a business expense, the said vehicle should be registered in the name of the owner or in the business name.

There are certain conditions for claiming this deduction under the newly inserted Section 80EEB and only a person who satisfies all these conditions would be eligible to claim deduction under this section. These conditions are:-

• Loan has been taken from a financial institution or a non-banking financial institution during the period beginning from 1st April 2019 and ending on 31st March 2023.
• The assessee who has availed the loan for the purchase of an electric vehicle must not own any other electric vehicle on the date of sanctioning the said loan.
• Electric vehicle is not restricted to Car alone but includes all kind electric vehicles. Even the purchase of 2-wheelers under a loan will give their respective taxpayers the chance to avail these benefits under the new Section.

“Electric vehicle” means 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;

1. Banking company to which the banking regulation Act, 1949 applies,
2. Bank or banking institution referred to in section 51 of banking regulation Act, 1949,
3. Any deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company as defined in clauses (e) and (g) of Explanation 4 to section 43B’.