July 12, 2021

Did you know in 2020 alone, more than 3.2 million new plug-in electric vehicles were registered globally. If you’re thinking of buying a new vehicle, this article will help you to understand the advantages of buying an electric vehicle and make a more informed decision.

What is an electric vehicle (EV) ?

EVs are vehicles that are either partially or fully powered on electric power. Electric vehicles have low running costs as they have less moving parts for maintenance and also are very environmentally friendly as they use little or no fossil fuels (petrol or diesel).

 

Advantages of switching to Electric Vehicle (EVs) –

1. Deduction of interest Paid– A deduction of ₹1,50,000 is allowed under section 80 EEB on the interest paid on loan taken to buy Electric vehicles.
2. Low GST rate – The government has reduced the rate of EVs from 12% to 5%. In addition to this, 
3. Exempt from Road tax in some states – EVs are exempt from road tax and registration costs in some states like Delhi, TN, etc. This will bring a huge reduction in the purchase price of the vehicle.
4. Exempt from Green Tax – The government has announced a Green Tax policy in Budget 2021 with the aim to reduce the pollution level. Under the Green Tax, personal vehicles would be charged tax at the time of renewal of registration certificate after 15 years. Whereas, electric vehicles would be exempt from Green Tax entirely. 
5. No fuel, no emissions – No petrol or diesel is required in a fully Electric vehicle.
6. Low maintenance – Petrol and Diesel vehicles require expensive engine maintenance over their lifetimes, but electric vehicles don’t. This is because a traditional combustion engine contains hundreds of moving parts that can potentially go wrong, whereas an electric motor has fewer than 20. This means that your EV is likely to have lower long-term maintenance costs than other vehicles.

More about Section 80 EEB of Income Tax Act

To encourage the purchase of electric vehicles, the government inserted a new section 80 EEB related to deduction of interest paid on loan taken to purchase electric vehicles.  

Following are the conditions to be fulfilled to claim deduction under 80 EEB:

1. Loan should be taken from a bank or specified NBFC.
2. Loan has to be sanctioned between 1st April 2019 and 31st March 2023.
3. This deduction shall not exceed ₹1.5 lakh and is allowed to claim from your total income from the financial year 2019-20 and onwards until the loan is repaid. Note: Only the Interest part of the Loan is to be allowed as a deduction.
4. This deduction is allowed for Individual taxpayers ONLY. However, if the individual runs a business (proprietorship firm) and the vehicle is used for the purpose of business, he/she can claim it as a business expense in their books irrespective of the amount. The vehicle has to be registered in the name of the owner or in the name of their business enterprise. In that case, the deduction of 1.5 lakh mentioned in point no. 3 will not be eligible since that person is already claiming it as a business expense and the individual cannot claim the same expense twice.
5. Deduction u/s 80 EEB is available for both 4 wheeled vehicles and 2 wheeled vehicles