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]

Extract of Clause 25 of Finance Bill 2019

25. Insertion of new sections 80EEA and 80EEB. 

After section 80EE of the Income-tax Act, the following sections shall be inserted with effect 30 from the 1st day of April, 2020, namely:––

Deduction in respect of interest on loan taken for certain house property.

‘80EEA. (1) In computing the total income of an assessee, being an individual not eligible to claim deduction under section 80EE, 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 acquisition of a residential house property.

(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 following conditions, namely:—

(i) 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, 2020;

(ii) the stamp duty value of residential house property does not exceed forty-five lakh rupees;

(iii) the assessee does not own any residential house property on the date of sanction of loan.

(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 45 the same or any other assessment year.

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

(a) the expression “financial institution” shall have the meaning assigned to it in clause (a) of sub-section (5) of section 80EE;

(b) the expression “stamp duty value” means value adopted or assessed or assessable by 50 any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

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 5 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), 10 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 15 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.’.

Note on 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 80EEA seeks to provide for deduction in respect of interest on loan taken for residential house property from any financial institution up to one lakh and fifty-thousand rupees subject to the conditions specified therein.

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 2020-2021 and subsequent assessment years.

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