Section 80EEB - Deduction On Purchase Of Electric Vehicle

Posted on: Dec 12, 2022 | | Written by:

Section 80EEB - Deduction On Purchase Of Electric Vehicle

Published on December 12, 2022. EST READ TIME: 3 minutes

Wouldn’t it be wonderful if you could commute with minimal expenses around cities and the occasional long trip? Well, electric two wheelers make it possible. Though electric scooters have been around for a while, the current generation of EVs has come a long way and offers much more than an affordable mode of transport. An EV with two wheeler insurance will ensure that you can travel as much as you can, with very few risks.

As mentioned, electric scooters aren’t new to the market in India. However, a recent ruling by the central government gave companies and consumers a push to go electric. In 2019, the central government announced incentives for buying EVs in the country.

To enable easier transformation, the government set aside a considerable budget to push for EVs in the country, which included funding for infrastructure and incentives. Even a new section was introduced to the Income Tax Act, Section 80EEB to accommodate EVs.

The new section aims at providing tax benefits to taxpayers who invest in EVs. Here is all that you need to know about the new section.

Who are eligible for Section 80EEB?

The section is exclusively available for individuals and not companies or partners. Any taxpayer that has taken a loan to fund their EV can avail of this benefit. Provided that the loan is from a financial institution, and they have not owned any EVs previously. Eligible taxpayers can avail of tax benefits in the form of a deduction of interest amount of the loan under Section 80EEB.

Do not forget to buy two wheeler insurance for your vehicle to secure it against various perils of driving on public roads.

What are the eligibility criteria?

You must meet the following eligibility criteria to be able to benefit from Section 80EEB.

● The section is only applicable to individual taxpayers. All other types of taxpayers do not qualify for this deduction.

● You must opt for a loan to finance the vehicle and it can either be for personal use or business use. If you are using the vehicle for business use, the interest paid exceedsRs. 1.5 lakhs for a financial year can be utilised as business expenses. However, for that to happen, the car should be registered in the name of the business owner.

● The sanction period of the loan should be between the 1st of April 2019 and the 31st of March 2023.

● The loan should be taken from a financial institution such as a bank or NBFC.

At this point, EVs are a bit more expensive as compared to fossil fuel vehicles. Thus, it is crucial to opt for comprehensive two wheeler insurance to keep your two wheeler safe.

What is the duration of benefits under Section 80EEB?

You can avail of the benefits of the Section from the assessment year 2020-2021 onwards. And the eligibility continues for all the subsequent years, till the completion of the loan amount. The tax benefits are not limited to deductions only. The government recently slashed the GST rates for EVs from 12% to 5%. Thereby, offering even higher savings on shifting to the EV bandwagon.

What are the total deductions under Section 80EEB?

Should you choose to buy an EV with the help of a loan, you can avail of deductions up to a maximum of Rs. 1.5 lakhs for a financial year. However, it must be kept in mind that the deduction is only on the total interest paid. You cannot consider the principal amount that you have paid toward the loan.

To ensure that you have a smooth tax filing session, ensure that you collect the interest certificate from your financial institution and have the details of your loan handy during filing.

Different components of Section 80EEB

Here are the definitions of the different components of Section 80EEB and how they impact your taxes.

• Financial Institution

Financial institution refers to any bank or banking institution according to the Banking Regulation Act of 1949. It also refers to NBFC or non-banking financial companies. NBFC can either be deposit-taking or non-deposit taking.

• Electric Vehicle

An electric vehicle refers to a vehicle that is solely powered by an electric motor. The vehicle usually has regenerative braking systems. The system converts the kinetic energy generated during braking and converts it into electrical energy and saves it in the battery pack.

Push for electric vehicles in India

The government introduced the FAME scheme or Faster Adoption and Manufacturing of Hybrid and Electric cars in 2019. It is currently in phase 2 of the FAME scheme which aims to encourage the usage of EVs across the country.

The program provides incentives for the purchase of electric vehicles, thereby offering an additional reason for vehicle owners to opt for EVs. FAME also offers finances for developing charging infrastructure and supporting electric transportation across the country. The incentives apply to two-wheelers, three-wheelers and four-wheelers. And the budget set aside for FAME 2 is Rs. 10,000 crores.

Why you should buy two wheeler insurance for your Electric Scooter?

Though it is mandatory to buy electric bike insurance, there are far more benefits than just dodging fines and hefty penalties. Here are the top benefits of buying two wheeler insurance.

● In the event of an accident, which involves third party individuals, the policy will cover all legal and medical expenses as well as repair costs for the damages. And some of these expenses can get quite steep. Thus, the lack of a policy can hurt a lot in such instances.

● When you opt for comprehensive two wheeler insurance, it offers coverage against your own damage as well. Thereby allowing you to claim the policy even for damages to your vehicle. Which is not possible in the case of a third party bike insurance plan.

● The IDV or insured declared value of your bike plays a crucial role in deciding the premium for your comprehensive plan. A higher IDV warrants a higher policy premium and a lower IDV can help you reduce the policy premium.

● You can avail of discounts in the form of NCB or no claim bonus if you do not make any claims during the term of a policy. It will help you further reduce the policy premiums.

● More importantly, you can ride your two wheeler with complete peace of mind. Since EVs are still in the developing stage, the lack of policy can hurt your finances in the case of any mishaps.

Conclusion

The popularity of electric vehicles is constantly on the rise over the last few years. And why not? They offer a lot of benefits in terms of low running costs and maintenance as compared to conventional bikes. And to make the deal even sweeter, the government is offering quite a few incentives for buying electric vehicles. Buy comprehensive bike insurance for your electric bike, so as to have all-around protection against all menaces.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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