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Did You Know Buying an EV Can Save You Money On Taxes? Know-How

Taxes

| Published: Monday, December 20, 2021, 14:10 [IST]

EVs are not only cost-effective, but they also have tax advantages in India. Non-electric vehicles for personal use are considered luxury products under Indian tax laws, therefore salaried professionals do not receive any tax benefits on auto loans.

However, to encourage the use of electric vehicles in India, the government of India created a new section that exempts EV owners from paying taxes. This section is 80EEB. Under this section, salaried professionals can take advantage of tax deductions while making an EV purchase. This could encourage salaried professionals to purchase an EV as their next vehicle a viable option.

How you can take advantage of the tax deduction on EV buying?

You can easily save tax on your first EV purchase under this section. To get the advantage of this deduction, all you have to fulfill the eligibility criteria, and conditions that apply to section 80EEB.

When paying off an EV loan, a total tax exemption of up to Rs 1,50,000 is available under section 80EEB. This tax break is applicable for both, four and two-wheelers electric vehicle purchases.

Eligibility Criteria

Individual taxpayers are the only ones who can benefit from this deduction. This deduction is not available to anybody, other than individual taxpayers.

You cannot claim a tax benefit under this provision if you are:

An AOP (Association of Persons)
HUF (Hindu Undivided Family)
Business
Partnership firms
Or any other form of the taxpayer

Conditions that apply to Section 80EEB for EV Tax deduction

1. This exemption is only accessible to each individual once, which means you cannot take advantage of Section 80EEB loan tax reduction if you already have an EV. This section is only benefited in the case of your first EV.

2. Any EV loan paid off between April 1, 2019, and March 31, 2023, is eligible for tax savings under Section 80EEB.

3. Those who want to finance an EV would be entitled to a tax deduction of Rs 1.5 lakh on the interest paid on the loan amount under section 80EEB.

4. This exemption is only available to people who are financing an electric vehicle. A loan from a financial institution or a NBFC (non-banking financial firm) should be used to fund the EV.

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Story first published: Monday, December 20, 2021, 14:10 [IST]