How to Claim the Electric Vehicle Tax Benefit in India

Electric vehicles (EVs) are increasingly viewed as the future of the automotive industry due to their eco-friendly nature. With growing awareness of their advantages, EVs have enjoyed a surge in popularity among the general population.

 

These vehicles offer numerous benefits, such as fuel cost savings and the promotion of a sustainable lifestyle. Governments are also providing income tax incentives to encourage the adoption of EVs. If you are considering purchasing an EV, it is crucial to understand the electric vehicle tax benefits to make an informed decision.

 

How Might Electric Vehicles Help You Save Money on Taxes?

In the Indian tax system, owning a car has traditionally been viewed as a luxury. So, there have been limited tax incentives or benefits associated with car loans. But, with the growing awareness of the severe environmental crisis, the Indian government is now actively providing initiatives to encourage the adoption of electric vehicles.

 

In line with this commitment, the Indian Government has introduced electric vehicle tax benefits aimed at incentivising EV ownership. To facilitate this, a new section has been added to the Income Tax Act, providing tax advantages to individuals who buy electric vehicles. Thus, promoting a greener and more sustainable automotive future in the country.

 

EV Tax Exemption

As part of the Union Budget 2019, the Indian government has taken important steps to promote the adoption of EVs by introducing tax exemptions for EV purchases. For those looking to buy electric vehicles, the government has introduced Income Tax Section 80EEB, specifically designed to offer attractive tax incentives.

 

Under Section 80EEB, electric vehicle owners can get themselves a substantial tax exemption of up to Rs 1.5 lakh of interest paid on the loan amount. This will reduce the financial burden of transitioning to cleaner and more sustainable transportation options. This initiative not only encourages eco-friendly mobility but also aligns with the government's commitment to reducing carbon emissions and mitigating environmental challenges.

 

Eligibility for Section 80EEB

The criteria to get tax benefits for buying electric vehicles under Section 80EEB are listed below:

• This section is beneficial only for individuals. A Hindu Undivided Family (HUF), partnership, business, Association of Persons (APO), or any other type of taxpayer is not eligible to take benefit of this tax deduction.
• You can only qualify for the tax exemption in this section if you have a vehicle loan to buy your electric vehicle.

 

Getting the EV Tax Benefit

If you are an individual taxpayer, you must get the tax invoices, interest-paid certificate, and loan documents. You have to compile them before filing your Income Tax Return (ITR), which should also include income tax deduction to get a tax exemption. The EV loan must have been approved and sanctioned after April 1, 2019, but before March 31, 2023. Furthermore, it must be bought from a registered financial institution or non-banking finance company to qualify for the tax exemption.

 

Benefits of Buying an Electric Car

Here are some of the advantages of buying an electric vehicle:

1. No Need for Pollution Under Control (PUC)

Having an EV eliminates the need for periodic Pollution Under Control (PUC) checks. Because of clean and emissions-free battery-powered operation, EV owners do not need to make an annual trip to pollution testing centres or maintain related documents.

 

2. Tax Benefits

Eligible EV buyers can make use of tax exemptions in Section 80EEB, as previously mentioned. This provision offers financial incentives for choosing electric vehicles, making them a smart and sustainable choice for eco-conscious consumers.

 

3. Reduced Taxation Burden

Electric vehicles enjoy a more favourable tax rate compared to traditional vehicles. Recently, the central government has reduced the Goods and Services Tax (GST) on EVs, reducing it from 12% to a mere 5%.

 

4. Green Tax

When a vehicle owner registers their car after 15 years, a green tax is levied. The green tax is removed when you buy an electric vehicle.

 

5. Low Operating and Maintenance Costs

Low operating and maintenance costs are one of the primary benefits of buying an electric vehicle. The cost of operating the e-vehicles is far lower than for internal combustion vehicles, as they run on electricity. Also, the absence of several moving parts significantly lowers the cost of maintenance.

 

6. Insurance

As per law, you must have electric vehicle insurance for your EV. If you decide to buy comprehensive car insurance for your electric vehicle, it will protect both your vehicle and your money from any unanticipated disasters in the future. Also, it will give you protection from any harm or loss to other parties.

 

Why Should You Insure an Electric Vehicle?

Purchasing an electric vehicle insurance policy provides essential financial security. If there is any loss or damage to the car, insurers cover the costs on your behalf. This protection ensures peace of mind and assistance in avoiding potential financial burdens.

 

When it comes to insuring your EV, you have two primary options. One is comprehensive insurance, offering all-encompassing protection for your vehicle. The other is third-party insurance, which is a mandatory requirement for all EV owners.

 

The true benefits of owning an electric vehicle are fully utilised when you combine it with a well-structured insurance plan, electric car subsidies, and tax incentives. This holistic approach ensures not only your peace of mind but also the financial advantages that come with sustainable and eco-friendly transportation.

 

Conclusion

By taking advantage of tax incentives and the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India (FAME India) subsidy program, buying electric vehicles can lead to substantial reductions in running costs. Considering the benefits mentioned above, buying an electric vehicle can be more than a wise choice.

 

It is important that you get electric car insurance to protect your investment. To promote the use of electric vehicles, Shriram General Insurance provides Comprehensive and Third-Party Insurance for electric cars.

 

FAQs

1. What are the most important considerations to keep in mind when buying an EV for daily use?

Here are some considerations to make when buying an electric vehicle:

• Consider your budget
• Maintenance cost of the vehicle
• Battery performance
• Consider the offered incentives
• Check the charging options
• Mileage etc.

 

2. Is it necessary to give proof of the benefit out of 80EEB?

You need to have a bank interest certificate to get the benefit from 80EEB. On the other hand, provisional interest certificates can also be used as proof to support a deduction claim.

 

3. Can a claim for 80EEB be made annually?

There is a Rs. 1.5 lakh annual deduction limit under Section 80EEB. The detection is available only once, and one cannot claim additional deduction under other provisions of the IT Act.