This is new section proposed In Budget 2019, government announced deduction of interest on loan taken to buy Electric Vehicle to boost purchase of Electric vehicles. 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. Scheme objective is to promote electric mobility and offers financial incentives for the purchase of electric vehicles and the creation of electric transportation and charging infrastructure.
Section 80EEB says:
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.’
Brief Points:
- Deduction is available only for individuals
- The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.
- Deduction of Rs.150000 for interest taken on loan for Electric vehicle
- Taxpayer may use electric vehicle for personal as well as business use
- In case of business use also deduction of Rs 1,50,000 under section 80EEB is allowed.
- Any interest payments above Rs 1,50,000 can be claimed as a business expense. To claim as a business expense, it is necessary that the vehicle should be registered in the name of the owner or the business enterprise.