Section 80EEB Income Tax : Deduction for purchase of electric vehicle

By | July 10, 2019
(Last Updated On: July 10, 2019)

Section 80EEB Income Tax : Deduction for purchase of Electric Vehicle

Budget 2019-20 Speech of Finance Bill 2019 on 05.07.2019

Incentive to purchase electric vehicle: In order to incentivise purchase of electric vehicle by an individual, it is proposed to provide deduction of an amount uptoRs. 1,50,000 for interest paid on loan taken for purchase of electric vehicle. The loan is required to be taken on or before 31st March, 2023.

Also Read Budget 2019-20 Key Decisions

Video Explanation of Section 80EEB deduction of Income Tax

 

Clause 25 of Finance Bill 2019

After section 80EE of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of April, 2020, namely

….

Deduction in respect of purchase of electric vehicle.

80EEB. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of purchase of an electric vehicle.

(2) The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2020 and subsequent assessment years.

(3) The deduction under sub-section (1) shall be subject to the condition that the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023

(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), 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.

(5) For the purposes of this section,––

(a) “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;

(b) “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.’.

Explanation of Clause 25 of Finance Bill 2019

Clause 25 of of the Bill seeks to insert a new sections 80EEA and 80EEB in the Income-tax Act relating to deduction in respect of interest on loan taken for certain house property and deduction in respect of purchase of electric vehicle.

The proposed new section 80EEB seeks to provide for a deduction up to one lakh and fifty thousand rupees in respect of interest on loan taken for purchase of an electric vehicle from any financial institution subject to the conditions specified therein

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 20202021 and subsequent assessment years.

Memorandum of Finance Bill 2019

Tax incentive for electric vehicles
With a view to improve environment and to reduce vehicular pollution, it is proposed to insert a new section 80EEB in the Act so as to provide for a deduction in respect of interest on loan taken for purchase of an electric vehicle from any financial institution up to one lakh fifty thousand rupees subject to the following conditions:
(i) the loan has been sanctioned by a financial institution including a non-banking financial company during the period beginning on the 1st April, 2019 to 31st March, 2023;

(ii) the assessee does not own any other electric vehicle on the date of sanction of loan.

It is also proposed that where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment year 2020-2021 and subsequent assessment years.

[Clause 25]

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