In the last few years the demand for electric vehicles has been increasing across India. The COVID-19 pandemic has accelerated the adoption of personal mobility and the continuous increase in the prices of petrol and diesel has fueled the demand for electric vehicles. Electric vehicles are proving to be not only zero-emissions but also efficient when compared to traditional ICE models. Overall, EVs are cost-effective through their proprietary experiences. Another advantage of electric vehicles is the tax benefits that come with them.
States like Delhi, Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu, Karnataka, Telangana and Meghalaya have announced their own policies to promote electric mobility. States like Delhi, Gujarat, Maharashtra and Meghalaya are focusing on incentivising EV buyers. On the other hand, states like Karnataka, Tamil Nadu, Andhra Pradesh and Telangana are focusing on producer-based incentives.
Buying an electric vehicle along with a vehicle loan can make you eligible for income tax benefits under 80EEB. Also, buying an EV will bring you tax benefits on GST, with the government reducing the rate to five per cent from the previous 12 per cent. Here you can avail tax benefits while buying any electric vehicle.
Tax benefits under 80EEB
India’s income tax rules treat cars for personal use as luxury products, for which consumers do not get any tax benefits on vehicle loans. However, consumers of electric vehicles can avail tax benefits on their vehicle loans under the recently added section known as 80EEB. Under 80EEB, on the interest paid on the consumer loan amount of the borrower EVS Will be eligible for tax deduction up to ₹ 1.5 lakh. This rule is applicable for both four wheeler and two wheeler.
Conditions for availing tax benefits under 80EEB
There are certain conditions for availing tax benefits under 80EEB.
- A consumer who has never owned an EV before can avail tax relief on loans under section 80EEB.
- The tax relief will be available to consumers who buy electric vehicles on loan. The debt financing agency should be a registered bank or NBFC.
- Tax relief will be available only to individuals and not to businesses.
- Tax relief under section 80EEB can be availed from the financial year 2020-2021.
- Income tax relief under section 80EEB can be availed for repayment of all EV loans taken between 1st April 2019 and 31st March 2023.