Section 80EEB of the Income Tax allows deduction from taxable income in respect of interest on loan taken for purchase of electric vehicle. Let’s find out how you can save income tax by purchasing electric vehicle.
As per section 80EEB, the interest on loan for an electric vehicle can be claimed as a deduction with a limit of INR 1.5 lakhs.
The vehicle loan should be taken
Now, let’s use the income tax calculator to see how much tax you can save with loan on an electric vehicle.
Step 2: Key in your salary details
Step 3: Declare your investments
Step 4: Now, calculate income tax
As per the calculation, you have a total tax liability of INR 100000
Step 5: Declare your vehicle loan
Key in the interest amount.
Step 6: Calculate income tax again
As you see, the total tax liability has come down to INR 68800
You can claim deduction only on the interest portion of the vehicle loan, and the principal part of the vehicle loan is not considered. You need to get a certificate from your bank on the interest you paid for the financial year.
Frequently Asked Questions
Will I get tax deduction if I purchase an electric vehicle without a vehicle loan?
No, you won’t. Tax deduction is only on the interest repayment of the electric vehicle loan.
What is the maximum tax saving on Section 80EEB?
A deduction of up to INR 1.5 lakhs is available under Section 80EEB. So, you get a maximum tax saving of INR 50,000.
Income tax deduction is available to what type of electric vehicles?
Under Section 80EEB, the incentives are available for 2 Wheeler, 3 Wheeler & 4 Wheeler electric vehicles!
Is tax deduction under Section 80EEB allowed for Hybrid Electric cars?
No. To avail deduction, you should purchase an electric vehicle which is exclusively powered by an electric motor. Also, the traction energy should be supplied exclusively by traction battery installed in the vehicle. The vehicle should also have electric regenerative breaking system.
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