Claim the Electric Vehicle Tax Benefit in India

Electric vehicles are revolutionizing transportation daily with their cost-effective and eco-friendly benefits. Their advanced technology eliminates noise pollution and delivers impressive acceleration. They represent a sustainable and economical choice for everyone as compared to traditional vehicles.

E-Vehicles: Driving the Future of the Automobile Industry

The government is also encouraging people to opt for electric vehicles by providing subsidies and other tax benefits in addition to that The Goods and Services Tax (GST) on sale of electric vehicles has been reduced from 12% to 5%. However many people are not even aware about the benefits associated with purchasing E-vehicles in India. Read the blog carefully to get into deeper insights related to the Electric Vehicle tax benefit in India and how tax can be claimed. 

Benefits of Purchasing E-vehicles in India 

There are several benefits linked to purchasing an electric vehicle, especially in India. These include positive environmental impact and potential tax advantages for individual taxpayers.

Some of them are listed below:

  1. Low Cost of maintenance: E-vehicle doesn't require that much maintenance cost as compared to that of other traditional vehicles. The requirement for servicing electric vehicles is lower compared to conventional petrol or diesel vehicles, resulting in a significantly lower yearly running cost for electric vehicles.
  2. Benefits to the Environment: Investing in an electric vehicle has a positive impact on the environment. By producing no harmful emissions and creating zero noise pollution, it helps to preserve and protect the world around us and thus results in pollution-free Vehicle Options. 
  3. Financial & Tax Benefits: The government of India has introduced several initiatives to promote the adoption of e-vehicles in India. One such imposition of Tax Section 80EEB, allows individual taxpayers to claim a tax benefit of 1.5 lakhs on the interest paid. This incentive aims to make owning e-vehicles more financially viable and encourages people to make the switch to environmentally friendly transportation options.

    The key mechanisms for securing incentives are:

    • Purchase Incentives: Enjoy a direct discount on the cost of the electric vehicle.
    • Coupons: Receive a financial incentive that will be reimbursed later
    • Interest Subventions: Enjoy a discount on the interest rate when obtaining a loan
    • Road tax exemption: Avoid paying road tax at the time of purchase
    • Registration fee exemption: Get the one-time registration fee waived when purchasing a new vehicle
    • Income tax benefit: Receive a deduction on the tax amount owed to the government
    • Scrapping incentives: Receive incentives upon de-registering old petrol and diesel vehicles
    • Others: Avail of incentives such as interest-free loans, top-up subsidies, etc.
  4. Better Storage Space: Electric vehicles offer good storage options due to their minimal or fewer moving parts in comparison to traditional vehicles. You can easily find ample seating and extra storage space for your long trips.
  5. Experience Incredible driving with minimal noise pollution: Mastering the operation of an electric vehicle is a breeze. With straightforward controls and no gears to worry about, all you need to do is accelerate, brake, and steer.
  6. Convenient: Charging at home is incredibly convenient. No more waiting in long lines at busy fuel stations during peak times.
  7. Wider safety Features: The safety Features in electric vehicles are far better as compared with other vehicles. You can rely on the advanced safety features of E-vehicles, which include automatic emergency brakes, forward collision warnings, lane-keep assist, and other driver assistance systems.

Electric Car Tax Exemption Section

As per the Union Budget 2019, the government of India is offering electric vehicle exemption in income tax for buying electric vehicles. A Tax Section 80EEB was introduced by the government to provide electric vehicle tax benefits. This section allows buyers to claim tax up to Rs 1.5 lakhs on the interest paid on a loan of the electric vehicle. 

Highlights of Tax Section 80EEB

  1. Direct Tax Saving:- The government imposes this section to encourage people to buy electric vehicles by offering a direct reduction in the taxable income. 
  2. Government Initiative:- It is a government initiative to publicize the E-vehicle market for a better environment and sustainability.
  3. Applicability:- This section applies to four-wheelers Electric Vehicles 
  4. Increase Affordability:- By providing tax benefits to the user government is helping in increasing the purchasing power of an individual to buy electric vehicles in the form of tax benefits. 

Eligibility Criteria of Tax Section 80EEB

To avail the benefit of this Tax Section 80EEB, certain criteria need to be taken care of are listed below: 

  1. An eligible taxpayer must be an individual, not a company, partner, or anyone 
  2. The loan must be utilised to buy E-vehicle 
  3. The loan must be obtained from a financial institution or a non-banking financial company to purchase an electric vehicle.
  4. The interest allowed under section 80EEB shall not be available under any other section of the Act.
  5. The individual should claim tax benefits and deductions in their own name, not by any representative of the assessee.
  6. The loan must be applied from April 1, 2019, to March 31, 2023

Documentation Requirements to Claim the Electric Vehicle Tax Benefit in India

There are some necessary documents required to obtain tax exemption 

  1. The individual taxpayer must have an interest certificate with them to avail the tax benefits  
  2. All the documents related to the loan must be with individual taxpayer 
  3. Make sure you keep a copy of the valid tax invoice when you purchase your electric vehicle (EV).
  4. Please ensure that you are regularly reviewing and updating compliance with Section 80EEB to ensure that you are always in line with any changes in the tax regulations.
  5. Businesses operating in the electric vehicle industry need to carefully strategize their financial planning to maximize the benefits under Section 80EEB.
  6. Ensuring systematic records and documentation is crucial for facilitating a seamless verification process.

Keep these points in mind while claiming tax benefits in India

Conclusion

As companies embrace sustainable practices, Section 80EEB is proving to be a vital tool for investing in electric mobility solutions. Alongside the environmental benefits, the government's financial incentives provide a compelling reason for businesses to transition to electric vehicles, leading to a greener and more tax-efficient future.

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Frequently Asked Questions (FAQ)

Absolutely Yes, 80EEB can be claimed every year but with certain Criteria which are mentioned below:

  • You can claim tax deduction benefits only if the loan is approved between 1 January 2019 and 31 March 2023.
  • The deduction is available to individuals who have taken a loan to purchase an electric vehicle from a financial institution or a non-banking financial company (NBFC).
  • The maximum deduction available under Section 80EEB is ₹1,50,000 per financial year.

The EMPS subsidy differs from the FAME I & FAME II subsidies as it is only available for a limited period of four months, starting from April 1, 2024, and ending on July 31, 2024

The FAME acronym stands for Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India. This government-backed initiative, launched in 2015, aims to actively promote the adoption of electric vehicles in India through its two phases: FAME India Phase I and FAME India Phase II.

In April 2019, the second phase of the FAME II scheme was launched with an initial budget of ₹10,000 crore, which was later increased to ₹11,500 crore. The scheme successfully concluded in March 2024.