Tax Benefits on Electric Vehicles in India: The Indian government is pushing for a greener future, and electric vehicles (EVs) are a key part of the plan. To incentivise EV adoption, tax benefits are offered to those who make the switch, apart from subsidies. But did you know there’s a hidden income tax deduction specifically for the interest paid on loans taken to purchase EVs?
Here’s the deal: Under Section 80EEB of the Income Tax Act, individual taxpayers can claim a deduction of up to Rs 1,50,000 on the interest paid for a loan used to buy an electric vehicle, according to Amarpal S Chadha, tax partner and mobility leader at EY India.
Also Read: ITR Filing AY 2024-25: Boost Your Tax Refund By Claiming THESE 5 Lesser-Known Deductions
This is a significant benefit that can potentially reduce your tax liability.
However, there’s a catch. This deduction is only available for loans approved between January 1, 2019, and March 31, 2023, he added. So, if you bought an EV with a loan during this window, you might be missing out on tax savings if you haven’t claimed this deduction yet.
Here’s how it works:
Let’s say you took a loan of Rs 5 lakh to buy an electric car in 2022 and paid Rs 1 lakh in interest over the loan term.
Under Section 80EEB, you can claim a deduction of up to Rs 1,50,000 on the interest paid.
In this scenario, since your interest payment (Rs 1 lakh) falls within the deduction limit, you can reduce your taxable income by Rs. 1 lakh, potentially leading to a lower tax bill.
Note: This calculation is for electric cars. For electric scooters like Ola, Ather or iCube, the tax calculation can be done accordingly.
It’s important to note:
This deduction is only applicable to the interest portion of the loan, not the principal amount.
You can claim this deduction while filing your Income Tax Return (ITR) for the relevant Assessment Year (AY).
The deadline for ITR filing for AY 2024-25 (FY 2023-24) is July 31, 2024.
So, if you bought an electric vehicle with a loan between January 1, 2019, and March 31, 2023, and haven’t filed your ITR yet, be sure to consult a tax advisor to see if you can benefit from this deduction. It could put some extra cashback in your pocket!
