How you can save 1.5 lakhs when buying an electric vehicle on a loan

Everyone is eligible for a deduction of upto 1,50,000 of interest paid on loans taken for the purchase of electric vehicles.

BHPian Siddharth_Ramani recently shared this with other enthusiasts.

If anyone is planning to purchase Nexon EV or any other EV for that matter, please make sure to utilise the tax benefit under 80EEB of Income Tax Act. Everyone is eligible for a deduction of upto 1,50,000 of interest paid on loans taken for the purchase of electric vehicles.

This is a deduction and not a tax relief. Meaning if your income is 10,00,000, you can get a deduction of maximum 1,50,000 and tax will be calculated on the remaining 8,50,000.

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Here's what BHPian prateekchanana had to say on the matter:

This is only valid if you register the car in individual name. If registered in name of company you are not entitled to these benefits.

Also this is only valid on interest component of the loan amount and not flat 1.5 lac based on value of car. If you take loan of 10 lacs and pay interest 50k in an year you can only claim a deduction of 50k and not the entire 1.5 lacs. You can read more here about the same.

You can claim the deduction on interest part for the entire loan period of you car.

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BHPian Siddharth_Ramani had the following to add on the matter:

1. It is applicable only on interest component. Few conditions,

a). The loan should be taken before 31st March 2023

b). Purchase should be from an Individual and not partnership or corporate.

2. Yes it is applicable till the closure of loan. Meaning you can get the benefit for subsequent assessment years also. However the loan should be sanctioned before 31st Mar 2023.

Here's what BHPian cool_dube had to say on the matter:

Please note that while the deduction can be spread across multiple assessment years (of course, within the loan tenure only), it is capped at INR 1,50,000. As an example - if I am paying an interest of INR 50,000 per year over a loan tenure of 5 years, I will be able to avail this benefit for first 3 years only.

point of owning an EV is to reduce carbon foot print

It is one of the key aspects but NOT the only one. "Ridiculously low running costs" comes to mind unless one owns an oil well  For anyone who has been able to overcome his/her stigma and driven an EV even once, it is very very difficult to NOT get floored by the silent, refined, and zippy driving experience. More than anything else, EV-adoption is a mental block which is difficult (but not impossible) to overcome. I say this after hesitantly getting on the EV bandwagon about 5 years back, and now there is no looking back for me.

Here's what BHPian shyampsundar had to say on the matter:

Just to add some perspective to this, my employer asks for IT declaration at the start of every year and 80EEB and 80EEA get reset to 0 at the start of every year with a cap of Rs 1.5L per year. So the treatment seems to be the same as housing loan interest deduction and not an overall cap across many years.

Here's what BHPian The_Rationalist had to say on the matter:

The tax exemption on interest paid for EV under section 80EEB is from 2019 to 2023 as of now. One can avail ₹1,50,000 exemption every year. But whether the scheme will be continued after 2023 isn't sure. And to get maximum benefit you need to take a loan of ₹22 lakh, then also it's only for first year you will be able to extract 1,50,000, second year onwards the interest paid will be less than 1,50,000. Hope this helps.

Here's what BHPian Vindi13 had to say on the matter:

Given uncertainty around tax benefit beyond this FY, Can we not pre pay the EMIs that pertain to subsequent years so that we reach the max 1.5 year deduction? ( My lender has not put any pte payment penalties)

Here's what BHPian varkey had to say on the matter:

There is no uncertainty around this benefit beyond the current FY. The tax benefit is available only for EV loans sanctioned before March 31, 2023. The tenure of the loan can be 5 or 7 or 10 years, there are no restrictions on it and you can claim deductions up to 1.5L for the interest component for every FY until the loan is closed.

Secondly the tax deduction is only for the interest component, so if you prepay the loan your interest component would reduce so you wouldn’t really be taking advantage of the benefit.

Read BHPian comments for more insights and information.