Purchase of Electric Vehicle – Tax benefits (Section 80EEB) and many more advantages!!

Planning to buy a car in the future?

How about an Electric car or E-scooter, they are set to be the norm.

Thinking about how is it going to benefit the average consumer? Read on…

Most of us don’t own electric cars, but now’s the time to start thinking about the advantages and disadvantages of electric vehicles.

Advantages of switching to Electric Vehicle (EVs) –

  • Tax Benefit – MOST IMPORTANT THING! You get a deduction of Rs. 1,50,000 under section 80EEB on the interest paid on loan taken to buy Electric vehicles.
  • Low GST rate – The government has reduced the rate of EVs from 12% to 5%. In addition to this, EVs are exempt from road tax and registration costs in some states like Delhi, TN, etc, and the same is going to be implemented in other states very soon. So, this will bring a huge reduction in the purchase price of the vehicle.
  • Exempt from Green Tax – The government has announced a Green Tax policy in Budget 2021 (the aim is to reduce the pollution level). Under the Green Tax, personal vehicles would be CHARGED TAX at the time of RENEWAL of registration certificate after 15 years. Whereas, electric vehicles would be EXEMPT from Green Tax entirely. In short, there are taxes and levies for polluting cars. Haha!
  • No fuel, no emissions – No petrol or diesel is required in a fully Electric vehicle.
  • Low maintenance – Petrol and Diesel vehicles require expensive engine maintenance over their lifetimes, but electric vehicles don’t. This is because a traditional combustion engine contains hundreds of moving parts that can potentially go wrong, whereas an electric motor has fewer than 20. This means that your EV is likely to have lower long-term maintenance costs than other vehicles.

While there are many advantages to purchasing an electric vehicle, but but but “every rose has its thorn”. Remember? So we should not be blind to the disadvantages –

  • limited range and long recharge time – EVs have a shorter range than normal vehicles. On average, most of them have a usable range of 400-450 km from 100% battery. Most electric cars take about 6-10 hours to fully charge from 0% battery. So, you better be well-planned in case you plan a long trip in your electric vehicle.
  • Can be difficult to find a charging station – Currently, there is a lack of charging points available. But don’t worry
  • The government wants you to drive electric vehicles, hence they have established and approved plans for establishing the necessary charging infrastructure for electric vehicles. So, this may not a disadvantage for a longer time.
  • Battery Replacement – Most manufacturers have a 5 to 8-year warranty on their battery. However, you can extend the battery life by avoiding using fast charging, or minimize exposure to extremely high temperatures when parked, etc.

Here’s a list of some of the Electric vehicles available in the Indian Market:

Brand Price Range
Magnus E-scooter Rs. 65,990/-
Zeal E-scooter Rs. 59,990/-
Strom Motors R3 Rs. 4.50 lakh
Tata Tigor EV Rs. 10.58 – 10.90 Lakh
Mahindra E Verito Rs. 10.15 – 10.49 Lakh
Hyundai Kona Electric Rs. 23.77 – 23.96 lakh
Jaguar I-Pace Rs. 1.05 – 1.12 Crore

The prices would further come down as more vehicles are being built. Recently, TATA Motors made an announcement that they plan to launch 10 EVs in Indian Market by 2025 and set up charging facilities across India.

Here’s more to Section 80EEB – TAX BENEFITS on purchase of EVs. In order to be eligible to claim the tax benefit, the following conditions are to be fulfilled: –

  • Loan should be taken from a bank or specified NBFC.
  • Loan has to be sanctioned between 1st April 2019 and 31st March 2023.
  • This deduction shall not exceed Rs. 1.5 lakh and is allowed to claim from your total income from the financial year 2019-20 and onwards until the loan is repaid.

Note: Only the Interest part of the Loan is to be allowed as a Deduction.

  • This deduction is allowed for Individual taxpayers ONLY. However, if the individual runs a business (proprietorship firm) and the vehicle is used for the purpose of business, he/she can claim it as a business expense in their books irrespective of the amount. The vehicle has to be registered in the name of the owner or in the name of their business enterprise. In that case, the deduction of 1.5 lakh mentioned in point no. 3 will not be eligible since that person is already claiming it as a business expense and you cannot claim the same expense twice.

Conclusion – There are plenty of advantages to buying an electric car, especially it being a cleaner, more environmentally-friendly way to travel. Make sure you don’t miss out on the incentives if you do buy one.

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13 Comments

  1. sandeep says:

    Wrong. … WHY? Explained below
    take a loan for max amount & max period for EV.

    eg. Take loan of 15 lakh, @ 7.5 for tax bracket of 30 % effective interest rate will be = 7.5 – 30 % = 5.4 %
    now invest your 15 Lakh in good fund and get about 8-9 % return. you will be in profit of = 9 – 5.4 = 3.6 % per year = 15 Lach x 3.6% = 54000 first year and so on consecutively.
    even long term FD will give you 6-7 %.
    calculate then decide.

    1. Sharath T Thomas says:

      Yes.

      “Electric vehicle” has been defined to mean 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.

  2. Aman Deep Singh says:

    It’s just makes your interest rate lower. Eg if interest is 7% and you’re in 30% tax bracket. Effective interest becomes 4.9 % with subsidy.

  3. Sharaththomas says:

    Tip: Don’t take a loan to buy an EV, just because you want to save some TAX! Because when you take the loan, you have to pay interest right. In this case, your expense (interest) will be greater than the amount of tax saved.
    For example, let’s say the interest amount on the loan for the year is Rs. 20,000/- which you pay extra. And the tax saved will be somewhere between 5%-30% of 20,000, depending on the tax slab your income falls under.

    All I am saying is don’t go for a loan if you have funds available with you. But if you are having a shortage of funds, then it’s fine to take a loan if you want to buy the vehicle.

    1. Brij Mohan says:

      Perfectly explained, Sharaththomas. As already said, don’t take a car loan if you don’t need one as the tax benefit of the interest component of the car loan is far less than the interest paid on the car loan availed from bank.

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