Section 80EEB – Income tax deduction on purchase of electronic vehicle by individual for personal use or for business use
Eligibility criteria :-
Any individual (Resident as well as Non-resident individual) take loan for the purpose of purchase of electronic vehicle for personal use from any financial institution and interest paid on such loan would qualify for deduction under this section.
The deduction under this section available only for individual and not available for any other person, if you are HUF, AOP, Partnership firm, company or any other kind of person, you can not claim benefit of this section.
Certain condition for availing this deduction :-
1. The assess should be an individual (Resident as well as non-resident individual)
2. Loan should be taken for purchase of electronic vehicle for personal use
3. Loan should be sanctioned anytime during the period starting from 01-April-2019 to 31-March-2023
4. Loan should be sanctioned by financial institution (Bank or Specified non-banking financial institution)
Amount of deduction :-
The maximum amount of deduction available under this section 80EEB is Rs. 1,50,000 per annum.
Deduction is available only on interest paid not an principal loan amount payment.
Period of Benefit :-
The benefit of this section available from the assessment year 2020-2021 and subsequent assessment year till the repayment of loan continues.
No Deduction under any other provision :-
Where a deduction under this section is allowed for any interest, 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.
Electrical vehicle used for proprietorship business:-
The benefit Section 80EEB can be claimed by individuals only. However, if the electric vehicle is used for the purpose of proprietorship business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount.
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR.
Example -I
The following are the particular relating to Ms. Mahima Jain, salaried individual and Mr. Hardik Agarwal & Ms. Nishi Agarwal, proprietor business for A.Y. 2022-23 and taken loan for purchase of electronic vehicle :-
| Particular | Ms. Mahima Jain | Mr. Hardik Agarwal | Ms. Nishi Agarwal |
| Amount of loan taken | 40 Lakh | 20 Lakh | 30 Lakh |
| Loan taken from | Non-banking financial institution | Public sector bank | HDFC Bank |
| Date of sanction of loan | 01.04.2021 | 01.04.2021 | 01.04.2021 |
| Date of disbursement of loan | 01.04.2021 | 01.04.2021 | 01.04.2021 |
| Assessee | Salaried individual | Proprietorship business | Proprietorship business |
| Purpose of loan | Purchase of electrical vehicle for personal use | Purchase of electronic vehicle for personal use | Purchase of electrical vehicle for proprietor business use |
| Cost of electrical vehicle | Rs. 50 Lakh | Rs. 25 Lakh | Rs. 35 Lakh |
| Rate of interest on loan | 10% p.a. | 10% p.a. | 10% p.a. |
Compute the amount of deduction, if any, allowable under the provisions of the Income-tax Act, 1961 for A.Y.2022-23 in the hands of to Ms. Mahima Jain, Mr. Hardik Agarwal & Ms. Nishi agarwal. Assume that there has been no principal repayment in respect of any of the above loans upto 31.03.2022.
Answer :-
| Particular | Rs. |
| Ms. Mahima Jain | |
| Interest deduction for A.Y. 2022-23 | |
| a) Deduction under Chapter VI-A from Gross Total Income | |
| Deduction u/s 80EEA | |
| (40 Lakh x 10%) = 4,00,000, restricted to 1,50,000, being the maximum permissible deduction | 1,50,000 |
| Comment :- If you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR so Ms. Mahima Jain used electronic vehicle for personal purpose so she claim deduction u/s 80EEB |
–
| Particular | Rs. |
| Mr. Hardik Agarwal | |
| Interest deduction for A.Y. 2022-23 | |
| a) Deduction under Chapter VI-A from Gross Total Income | |
| Deduction u/s 80EEA | |
| (20 Lakh x 10%) = 2,00,000, restricted to 1,50,000, being the maximum permissible deduction | 1,50,000 |
| Comment :- If you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR so Mr. Hardik Agarwal used electronic vehicle for personal purpose so he claim deduction u/s 80EEB |
–
| Particular | Rs. |
| Ms. Nishi Agarwal | |
| Interest deduction for A.Y. 2022-23 | |
| a) Interest Allowed as a business expenses under profit and gain for business & profession | |
| Business expenses | |
| (30 Lakh x10%) = 300000 allowed as a business expenses under Profit and gain for business & profession | 3,00,000 |
| Comment :- If you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR so Ms. Nishi Agarwal used electronic vehicle for business purpose so she claim interest amount as a business expenses under profit and gain for business & profession |
Meaning of certain terms :
| Sr. No. | Term | Meaning |
| (a) | Financial Institution |
|
| (b) | Electric Vehicle | A vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle. The vehicle should have electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy. |
Author Bio
Can Claim for deduction of interest from business income be disallowed as the vehicle is used for PERSONAL purpose ?
yes , you can claim deduction u/s 80EEB ,if assets use for personal purpose, you can refer the example of hardik agarwal in this article.
The issue is the other way around.
Once PERSONAL USE is claimed, can deduction of interest ALSO be claimed for BUSINESS?
No, if you have used assets for personal use than you can not claim interest expenses as a business expenses
No, if you have used electric vehicle for personal use than you can claim deduction u/s 80EEB, but can not claim expenses benefit in business income
If you have used electric vehicle for business use than you can not claim deduction u/s 80EEB