Tax Deduction for E-Vehicle Loans under Section 80EEB

Promoting Green Growth: To reduce pollution and encourage environmentally friendly growth, the Indian government offers tax deductions on loans for electric vehicles (EVs) under Section 80EEB. FAME Scheme: The FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) Phase II scheme promotes electric mobility by providing financial incentives for EV purchases and developing charging infrastructure.

Eligibility for Deduction: Only individuals can claim deductions under Section 80EEB. Other entities like firms, HUFs, companies, or AOPs are not eligible. Electric Vehicle Definition: An eligible EV is powered solely by an electric motor with energy from a traction battery and includes an electric regenerative braking system.

Loan Conditions: The EV loan must be from a financial institution or NBFC and sanctioned between April 1, 2019, and March 31, 2023. The interest deduction cannot be claimed under any other section. Deduction Limit: Individuals can claim up to INR 1.5 lakh on interest paid for an EV loan each year until the loan is fully repaid. Necessary documents must be kept for filing the income tax return.

Business Use: If an EV is used for business, it must be reported as an asset, and the loan as a liability. The business can claim the interest as an expense and also claim depreciation. The vehicle must be registered in the name of the business or the owner. Example: Mr. Swapnil, a salaried individual, purchased an EV with a loan sanctioned on May 25, 2022. He can claim the interest deduction under Section 80EEB for FY 2022-23 since the loan was sanctioned before March 31, 2023.