In the full Budget, presented on July 5, 2019 a new section 80EEB was introduced which would give tax exemption up to Rs 1.5 Lakhs on interest paid for purchase of electric vehicles provided it fulfills certain conditions.
Eligibility Conditions for 80EEB
Following are the eligibility conditions for Section 80EEE:
- The loan should be sanctioned by the financial institution (banks, NBFCs, etc) between April 1, 2019 to March 31, 2023
- Only the interest part of the loan is eligible for deduction u/s 80EEB
- The maximum amount of deduction under this section 80EEB in a financial year is Rs 1.5 lakhs
- This is over and above 1.5 Lakh deduction u/s 80C
Would Tax Payers Benefit by 80EEB?
The move is in the right government from environment perspective as it would help somewhat in faster adoption of electric vehicles. As of today, we do not have much choice for electric cars.
- Hyundai Kona Electric
- Mahindra e-Verito
- Tata Tigor EV
- Tata Nexon EV
Assuming car loan of Rs 8 Lakh for 5 years at 11% interest the EMI would be Rs 17,394. Over the 5 years the total interest outgo would be Rs 2.44 lakhs and assuming to be in 30% tax bracket, you would save Rs 72,000 in taxes.
I don’t think just this is going to push people to buy electric cars as the infrastructure to run these cars is still not in place yet. However, by giving clarity for next 5 years about the tax break, everyone from car companies, infrastructure builders to consumers may keep an eye on emerging new electric vehicles. In this Budget the GST on electric cars have been reduced to 5% – which would further help in lowering the cost
But for now very few tax-payers would be able to take tax benefit of Section 80EEB.
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What is Lakh?