Electric vehicles (EVs) are all set to be the future of transportation. EVs are not only good for the environment but are more energy-efficient compared to traditional fuel-powered vehicles.
Many foreign countries have created a vision of ‘zero emissions globally’. Experts estimate that most countries will resort to a hundred per cent reliance on electric vehicles in the next two decades. Countries like Germany and Netherland have the highest number of EVs and substantial charging stations to drive this change. Apart from this global drive to protect the environment, the ever-increasing price of petrol and diesel has shifted customers’ preferences towards electric vehicles. Besides being economical, EVs also come with tax benefits offered by the Income Tax Department of India.
With a motive to build a mindset of a sustainable environment and promote the purchase of electric vehicles, the Government of India has introduced a new section to give relief to the buyers of electric vehicles.
Under Section 80EEB, a tax deduction up to Rs.1.5 lakh is allowed for the interest paid on loan availed to purchase an electric vehicle. This deduction is an attractive proposition for individuals to choose electric vehicles as their next vehicle purchase. The deduction is available for both four-wheeler and two-wheeler electric vehicles.
Section 80EEB deduction is eligible subject to the following conditions:
- Deduction under this Section is available only to individuals and not businesses.
- The deduction is applicable for the interest component paid on loan availed to purchase electric vehicles.
- The maximum deduction allowed is up to Rs.1.5 lakh.
- The electric vehicle (EV) should be bought on loan from a bank or a Non-Banking Financial Company (NBFCs).
- The deduction will be allowed for the loan sanctioned between the 1st of April 2019 and the 31st of March 2023.
Apart from this, the government has reduced the Goods and Services Tax (GST) rate on EVs from 12% to 5%. Also, some states have exempted EVs from road tax and registration. Other state governments are also considering and might waive road tax on EVs. This will lead to a massive reduction in the purchase cost of the vehicle. Additionally, the government has exempted EVs from the ‘green tax’ introduced recently in Budget 2021.
These benefits overthrow the challenges of electric vehicles like shorter travel ranges and lack of charging points. The infrastructure challenge for EVs is temporary and will get addressed gradually. However, there is a positive long-term impact of EVs on our environment and resources, which is why the government wants to encourage more use of electric vehicles.
There has been a gradual increase in the number of electric vehicles visible on roads. Also, many automobiles have now started to manufacture electric vehicles. The electric vehicle industry will soon see many launches coupled with heightened demand from customers.
With all these benefits and a healthy environment for our future generations, do you think you would prefer purchasing?
For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in
I am a Chartered Accountant by profession with 4+ years of experience in the finance domain. I consider myself as someone who yearns to explore the world through travelling & Reading. I believe, the knowledge & wisdom that reading gives has helped me shape my perspective towards life, career and relationships. I enjoy meeting new people & learning about their lives & backgrounds. My mantra is to find inspiration from everyday life & thrive to be better each day.
