Drive electric, save big: Section 80EEB cuts EV loan costs
What's the story
The Indian government implemented Section 80EEB to encourage the adoption of electric vehicles by providing tax benefits on loans obtained for their purchase.
This initiative is intended to minimize the carbon footprint and make electric vehicles more affordable for the general public.
Under this section, individuals can claim a deduction on the interest paid on loans secured for the purchase of electric vehicles.
Eligibility
Eligibility criteria for claiming deduction
In order to claim deduction under Section 80EEB, you should have taken a loan from a financial institution or a non-banking financial company for buying an electric vehicle.
The said loan should have been sanctioned between April 1, 2019, and March 31, 2023.
Both four-wheelers and two-wheelers are eligible as long as they are solely powered by an electric motor.
Limit
Maximum deduction limit
Section 80EEB permits a deduction of up to ₹150,000 on the interest portion of the loan each year.
While there is no limit to the loan amount, the deduction is capped at the interest paid.
This advantage is in addition to any other tax deductions you may be entitled to under various sections of the Income Tax Act.
Documentation
Documentation required
In order to claim this deduction, individuals should keep all the necessary documents, such as loan sanction letters, interest repayment certificates from the bank or NBFC, and proof of purchase of the electric vehicle. These documents might be needed when filing income tax returns or during any assessment proceedings by the Income Tax Department.
Claim process
How to claim deduction under Section 80EEB
Claiming a deduction under Section 80EEB is simple.
While filing your annual income tax return, just enter the interest paid on the electric vehicle loan in the "Deductions under Chapter VI-A" section.
Though you need to maintain all relevant documents like the loan sanction letter and interest repayment certificates issued by the bank or non-banking financial company handy. These might be needed for verification by tax authorities.
Tips
Important tips before applying for EV loan
Before availing an EV loan with the aim to claim deductions under Section 80EEB, it's important to verify that your lender will supply you with an annual statement that clearly shows how much interest you've paid during the year.
And, always compare various banks and NBFCs based on their loan terms, including interest rates, processing fees, and tenure options, to get the best deal for you.