Deduction under section 80EEB of Income Tax Act

Currently, with an aim to promote the electric vehicle market, the Government is coming up with various exemption, deductions and rates cuts. One such step is the insertion of new deduction section 80EEB in the Income Tax Act, 1961.

Newly introduced section 80EEB provides deduction in respect of interest paid on loan taken from the financial institution for purchasing of an electric vehicle. The current article thoroughly explains the features of newly inserted section 80EEB.

Features of newly inserted section 80EEB –

The features of section 80EEB of the Income Tax Act is listed hereunder –

• Deduction under section 80EEB is available only to an individual. Accordingly, the deduction is not available to any other assessee like AOP, HUF, company, firm etc.
• In the absence of any specification, deduction under section 80EEB is available to both resident as well as a non-resident individual.
• The deduction is available only if the loan is taken from the financial institution for the purpose of acquiring/ buying an electric vehicle.
• The loan should have been approved during the period 1^st April 2019 to 31^st March 2023.
• The maximum amount of deduction available under section 80EEB is INR 1.50 Lakhs.
• The deduction of interest amount shall be available under section 80EEB from 1^st April 2020 till the repayment of a loan.
• Once the deduction with respect to interest has been claimed under section 80EEB, no further deduction can be claimed for such interest payment under any other provisions of the Act for the same or any other assessment year.
• The most important definition of the term ‘electric vehicle’ is contained under section 80EEB (5) (a). ‘Electric Vehicle’ here means a vehicle which is powered exclusively by an electric motor whose transaction energy is supplied exclusively by transaction battery installed in the vehicle and has an electric regenerative braking system.
• Further, the term ‘financial institution’ has been defined under section 80EEB (5) (b) which means –
  • A banking company to which the Banking Regulation Act applies; or
  • Any bank or banking institution referred to in section 51 of the Banking Regulation Act.
  • The term includes any deposits taking the non-banking financial company or a systematically important non-deposit taking the non-banking financial company as defined under Explanation 4 (e) and (g) to section 43B.

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