As the current financial year draws to a close, taxpayers’ worries are growing about how to save more and get the best benefit while filing income taxes. Although some provisions in the Income Tax Act provide tax exemptions for tax preparers, buying a vehicle and the related loan does not provide them with any relief. However, to promote electric mobility in India, the central government has introduced a new section of the IT Act, 80EEB, through which electric vehicle buyers who are borrowing money to buy an EV can get benefits. benefit up to $1.5 thousand.
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Here are all the details you want to know about 80EEB.
What is 80EEB?
80EEB is part of the Income Tax Act, which is administered specifically to electric vehicle buyers who use car loans to purchase an EV. This section allows an individual taxpayer to claim a deduction of up to $1.5 lakh towards the interest component of the car loan made to purchase an EV. Under this section, each taxpayer may claim a maximum deduction $1.5 lakh only once in an evaluation year. The benefits are for individual taxpayers only, not for corporations or businesses.
Key details about 80EEB . benefits
To take advantage of the benefits of section 80EEB of the Income Tax Act, the beneficiary must be an individual taxpayer, not any business or corporation. However, EVs can be used for personal or business purposes. This benefit is only available to individuals who purchase an EV by opting for a car loan, which must be made between April 1, 2019 and March 31, 2023.
If the buyer uses an electric vehicle for business purposes and the interest paid on the car loan exceeds $Threshold of 1.5 lakh in a financial year, it can be shown as a business expense. However, to take advantage of that benefit, the vehicle must be registered in the name of the business owner. The loan must be made from a financial institution such as a bank or NBFC.
The 80EEB sectional deduction limit is set at $1.5 thousand per year. One cannot claim an extra deduction under any provision of the IT Act. The deduction applies only once to taxpayers in a fiscal year and applies to first-time buyers of electric vehicles. Benefits are available for electric two-wheelers and four-wheelers.
Calculate the deductible amount below 80EEB
If you buy an electric car for $22 lakh and avail car loan $20 lakh at 10 percent interest per annum to purchase from a registered bank or NBFC, interest payable on the loan will be $2 thousand. Under section 80EEB, you may request a $deduction of 1.5 thousand on $2 lakh interest paid to the lender. However, the rest $50,000 will be taxable.
First published date: February 19, 2023, 10:35 a.m. IST