In the Final Budget for 2019-20 presented on July 5, 2019 by FM Nirmala Sitharaman- a new section 80EEB has been introduced. This section provides a deduction of up to Rs. 1.50 lakh for the interest payable on loan taken from a financial institution for purchase of electric vehicle. The deduction is available from the financial year 2019-20 (Assessment year 2020-21).
The key conditions for this deduction:
- Loan should be sanctioned in period between April 1, 2019 to March 31, 2023
- Loan should be taken from a Financial institution (Bank/NBFC etc)
- Loan should be for purchase of an electric vehicle
For this purpose, “Electric Vehicle” means 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.
So it seems all types of electric vehicles like electric cars, electric scooters etc. are covered in this deduction.
With this deduction, the government has shown a strong intent to encourage use of electric vehicles. They have also increased the cess charged on petrol / diesel by Re.1. Clearly, there is a signal to move the Indian consumers towards alternative fuels with electric vehicles in the lead.
However, there is still a long way to go in terms of creating infrastructure for charging electric vehicles to make people actually take the move to buy an electric vehicle. Currently, there are few players in electric automotive market like Mahindra, Tata and Hero Electirc (for electric scooters)
Following is the Bare Act:
80EEB: Deduction in respect of purchase of electric vehicle.
(1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution for the purpose of purchase of an electric vehicle.
(2) The deduction under sub-section (1) shall not exceed one lakh and fifty thousand rupees and shall be allowed in computing the total income of the individual for the assessment year beginning on the 1st day of April, 2020 and subsequent assessment years.
(3) The deduction under sub-section (1) shall be subject to the condition that the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023.
(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), 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.
(5) For the purposes of this section,––
(a) “electric vehicle” means 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;
(b) “financial institution” means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act and includes any deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company as defined in clauses (e) and (g) of Explanation 4 to section 43B.’