BUDGET 2019 80EEB : DEDUCTION IN RESPECT OF PURCHASE OF ELECTRIC

Abhilasha Pawar CEO, Founder Director BIZSUTRA CONSULTANT PRIVATE LIMITE

2021-12-18

Introduction

Pushing ahead with its goal to have more electric vehicles to curb rampant pollution afflicting major cities and trim costly oil imports, the government has started from 1 April 2019, the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of ₹10,000 crore. Although this sum may not be significant compared to some developed countries, the incentives announced in the budget for this sector will go a long way in restoring the confidence of investors and customers alike. There are many types of electric vehicles such as electric cars, electric autos, electric bikes, electric scooters etc. however, amongst all, manufacturing and putting the electric cars on road is the vision to make India pollution free along with saving the precious petroleum.

The Finance (No. 2) Bill, 2019

Currently we are living in more polluted environment which is a harmful for the healthy living. Pollution should never be price of prosperity. To promote more use of electric vehicle and to reduce environmental pollution caused due to vehicles in India, the Finance Bill 2019 introduced new section 80EEB of Income Tax Act. With this section the finance minister Nirmala Sitharaman announced income tax rebates of up to ₹ 150,000 to the Individual assessee with respect to interest paid on loan taken for the purchase of electric vehicles.

Eligibility

The deduction under this section is applicable only to Individual. In other words this deduction is not applicable to HUF, AOP, BOI, Partnership Firm, LLP, Private limited Company or any other kind of taxpayer. Only individual taxpayer can only claim deduction under section 80EEB subject to the condition.

Condition to claim deduction

1. The Loan has been sanctioned by the financial institution including Non Banking Financial company for purchasing an Electric vehicle.
2. The loan has been sanctioned during the period beginning on the 1st day of April, 2019 and ending on 31st March 2023.
3. Where a deduction under this section is allowed for any interest under this section, deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year.
4. The assessee does not own any other electric vehicle on the date of sanction of loan.

For the purpose of this section   

1. “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
2. “financial institution” means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act and includes 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.’.

Purpose

The use of Electric Vehicle is not a condition attached to claim the deduction under section 80EEB. Electric Vehicle Purchase for personal use or use of the Family Members, relative or other can also claim the deduction under this section.