In the Union Budget 2019, the government has announced an incentive for all those who will purchase electric vehicle. In the budget speech, the finance minister has stated that advanced battery and registered e-vehicles will be incentivized under the scheme.
A new section 80EEB of Income Tax Act, 1961 has been introduced to meet the above purpose. As per the provisions of section 80EEB of Income Tax Act, 1961 taxpayer can claim deduction for interest paid on loan taken for the purchase of electric vehicles from the AY 2020-21.
Following conditions needs to be satisfied to claim deduction under section 80EEB of Income Tax Act, 1961;
- Loan should be taken from bank or specified NBFC
- Loan has to be sanctioned between 1st of April 2019 and 31st March 2023
- This deduction amount shall not exceed Rs 1.5 lakhs
- Loan should be taken for purchase of Electric Vehicle
- Only the interest amount of the loan is to be allowed as a deduction
- Only individuals can claim this deduction
- Only individual taxpayers can claim deduction under section 80EEB of Income Tax Act, 196. If the Individual holds a proprietorship firm and using electric vehicle for the purpose of business then he/she can claim it as a business expense in their books irrespective of the amount.
- To claim the deduction as a proprietor, he/she needs to meet below conditions;
- The vehicle has to be registered in the name of the owner or in the name of their business enterprise.
- In that case, the deduction of 1.5 lakh will not be eligible since that person is already claiming it as a business expense and you cannot claim the same expense twice.
Benefits of buying an Electric vehicles
Check out the below benefits of buying an Electric Vehicles;
- Electric Vehicles are exempt from road tax and registration costs in some states as specified in the Act.
- The GST rate is 5% only (Earlier it was 12%).
- Electric vehicles are exempt from Green tax. Personal vehicles would be charged tax at the time of renewal of RC book after 15 years. Whereas, Electric Vehicle would be exempt from Green Tax entirely.
- There is no requirement of fuel as it’s an electric vehicle
- The maintenance cost is very less because a traditional combustion engine contains hundreds of moving parts i.e. more wear and tear whereas an electric motor has fewer than 20.
Promotion of electric vehicle mobility solution
The union cabinet has approved Phase-II of FAME scheme for promotion of electric mobility in the country. The FAME (Faster Adoption and Manufacturing of Electric Vehicles) is an incentive scheme of the government of India for the promotion of electric and hybrid vehicles in the country.
The objective of the scheme is to promote electric mobility. This scheme offers financial incentives for the purchase of electric vehicles and the creation of electric transportation and charging.
Under the scheme, the incentives are available for 3 Wheelers, 4 Wheelers and electric 2 wheelers. The Phase-II of the scheme has started from 1 April 2019 and will be completed by 31 March 2022. The Phase-II is an expanded version of the first phase. FAME India Phase II has a total outlay of Rs 10000 Crores over a period of 3 years from 1 April 2019 to 31 March 2022.