Electric vehicles are at the forefront of India’s fight against climate change. The country, at COP26 pledged to reduce carbon emissions by one billion tonnes by 2030 as well as raise the share of renewables in the energy mix to 50%. In order to achieve this goal, the EV market needs govt intervention. One such incentive comes in the form of tax savings. Also Read - This Indian EV company plans to open over 500 dealerships by end of FY22
The tax deductions incentive was introduced during the Budget Session in 2019 under the new section 80EEB. This provided tax benefits to registered electric vehicle buyers. Also Read - EV owners take notice! Govt releases notification for at-home electric vehicle chargers
What is section 80EEB?
The new section 80EEB provides a maximum tax exemption of up to Rs 1,50,000 to buyers who opt to finance their vehicle from an authorized financial institution. The exemption will be applicable to the interest paid on the loan amount. It will be applicable to both two-wheelers and four-wheelers. Also Read - This is how you can turn your regular car into an Electric car. Thank us later!
-The exemptions will only be available to individuals and not any other entity or organizations.
-The loan has to be sanctioned by the financial institution during the period beginning on 1 April, 2019 and ending on 31 March, 2023.
-The loan has to be sanctioned by a financial institution or NBFC. Over here, “financial institution” means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act.
-The exemption won’t be available to second-time EV buyers. Only those who are the first owners can apply for the exemption.
-The buyers should keep all necessary documents such as the tax invoice, interest paid certificate and other loan-related documents ready at the time of filing ITR
Apart from just tax incentives, the FAME scheme has also allowed manufacturers to provide cheaper prices to the end-consumer, bringing down prices as low as their ICE counterparts. The central govt has also asked states to provide subsidies to electric vehicle buyers to further reduce the prices.