Section 80EEB Explained: Tax Benefits For Your Electric Vehicle Loan

Electric vehicles (EVs) have emerged as a practical and environmentally responsible alternative to traditional petrol and diesel vehicles. As fuel prices remain unpredictable and environmental concerns increase, more individuals are considering EVs not just as a luxury but as a necessary switch for the future.

Recognising this shift, the Government of India introduced a series of policy and financial incentives aimed at boosting electric mobility. One such fiscal initiative is Section 80EEB of the Income Tax Act. The section allows individual taxpayers to claim a deduction on the interest paid on loans taken specifically to purchase an electric vehicle.

If you have purchased or are planning to purchase an EV using a loan that was sanctioned within the prescribed period, this blog will help you understand how you can benefit from deductions under 80EEB for electric vehicles.

Understanding Section 80EEB: Purpose and Scope

Section 80EEB was introduced in the Union Budget 2019 with the primary aim of accelerating the adoption of electric mobility in India. It offers individual taxpayers an additional tax deduction of up to ₹1,50,000 per financial year on the interest paid on a loan taken for buying an electric vehicle (for loans approved within a specific time period).

Unlike broader deductions such as Section 80C, which cover a wide range of investments, Section 80EEB is specific and targeted. It applies only to interest payments and only for electric vehicle loans sanctioned during a specific period.

The scope of the deduction is fairly inclusive when it comes to vehicle types. Both two-wheelers and four-wheelers are covered under the section, as long as they meet the technical criteria of being fully electric.

Who Can Claim the 80EEB Deduction?

To claim the 80EEB deduction, you must fulfil all the specified eligibility conditions. Here’s a breakdown of the requirements:

1. Only for Individual Taxpayers

The deduction under Section 80EEB is available only to individuals. This means:

• Salaried employees
• Self-employed professionals
• Business owners

Entities such as Hindu Undivided Families (HUFs), partnership firms, companies, BOIs, and AOPs are not eligible.

2. Loan Sanction Period

The EV loan should have been sanctioned between 1st April 2019 and 31st March 2023. If your loan falls outside this window, the deduction cannot be claimed.

3. Loan Purpose

The loan must have been taken exclusively for the purchase of an electric vehicle. Loans taken for hybrid vehicles or for other personal needs do not qualify under this section.

4. Lender Must Be a Recognised Institution

Only loans from:

• Banks (Public or Private Sector)
• Non-Banking Financial Companies (NBFCs)

are valid under this section. Loans from friends, family members, or unregistered lenders will not be considered for the deduction.

5. Old Tax Regime Requirement

You can claim the electric vehicle deductions 80EEB only if you have opted for the old tax regime while filing your income tax return.

Key Tax Benefits Under Section 80EEB

The Section 80EEB deduction is designed to reduce the effective cost of owning an electric vehicle, especially when funded through a loan. Here are the key tax benefits in detail:

1. Deductions Up to ₹1,50,000

The most important benefit is that you can claim a maximum deduction of ₹1,50,000 per financial year on the interest paid (as long as you fix the eligibility criteria). For long-term loans, this benefit adds up to substantial tax savings over the tenure.

2. Benefit Is Over and Above Other Sections

You can claim 80EEB in addition to benefits under other sections, such as:

• 80C (for investments like PPF, ELSS)
• 80D (for medical insurance premiums)
• 24(b) (for home loan interest on self-occupied property)

3. Applicable for Personal and Business Use

If you have purchased the EV for:

• Personal use: You can claim interest up to ₹1.5 lakh under 80EEB.
• Business use: You can still claim ₹1.5 lakh under 80EEB, and any interest amount above ₹1.5 lakh can be treated as a business expense. For this, the vehicle must be registered in the business name or your name.

4. No Cap on Vehicle Type

The section applies to both two-wheelers and four-wheelers, as long as they are fully electric and comply with the definition laid down in the Act.

Documents Required To Claim The 80EEB Deduction

To successfully claim your 80EEB deduction, you will need to maintain a proper record of the following documents:

• Loan Sanction Letter showing approval date (must fall between 1st April 2019 - 31st March 2023)
• Loan Agreement and Repayment Schedule
• Interest Paid Certificate from the bank or NBFC
• Invoice for the Electric Vehicle
• Vehicle Registration Certificate (RC)
• Tax Invoices or Payment Receipts
• Proof of use (especially if claiming for business use)

Ensure that all these documents are retained for at least 6 years from the end of the financial year in case of a future tax scrutiny.

Step-by-Step Process: How To Claim The Deduction

Here’s a simple step-by-step guide to claim electric vehicle deductions under 80EEB:

Step 1: Check Eligibility

Ensure you are an individual taxpayer, filed under the old tax regime, and your loan was sanctioned between the stipulated dates.

Step 2: Collect Required Documents

Request the interest certificate from your bank or NBFC, and keep your EV purchase invoice and other relevant documents ready.

Step 3: File Income Tax Return

• Go to the deductions section under Chapter VI-A in your ITR form.
• Choose Section 80EEB and enter the interest amount (up to ₹1.5 lakh).
• Upload or maintain supporting documentation as needed.

Step 4: Declare in Business Income (If Applicable)

If the vehicle is used for business, ensure to:

• Record interest above ₹1.5 lakh as a business expense
• Show the vehicle as an asset in your books of accounts

80EEB Deduction Example

Let’s say you took an EV loan of ₹ 10 lakh in December 2022 with a 5-year repayment period. Your total interest payment in FY 2024–25 is ₹1.8 lakh.

• You can claim ₹1.5 lakh under Section 80EEB.
• The remaining ₹30,000:
  • If for personal use: Cannot be claimed.
  • If for business use: Can be claimed as a business expense if the vehicle is registered to a business entity.

This results in an immediate tax saving, especially if you fall in the higher tax bracket.

Missed The 80EEB Window? What You Can Do

Unfortunately, if your loan was sanctioned after 31st March 2023, you cannot claim any deduction under Section 80EEB. The government has not extended the applicability of this section to new loans.

However, you can still:

• Check state-level subsidies for electric vehicles

Many state governments in India offer their own financial incentives to encourage EV purchases. These can significantly reduce your upfront or recurring costs:

1. Road‑Tax and Registration Fee Waivers

   Several states waive or heavily discount one‑time levies when you register an EV. For instance, Delhi and Karnataka offer a full waiver of road tax and registration charges for both electric two‑wheelers and four‑wheelers, saving you anywhere between ₹3,000–₹20,000 at purchase

2. Direct Purchase Subsidies

   States like Maharashtra and Tamil Nadu provide direct purchase subsidies ranging from ₹5,000 for electric scooters to over ₹50,000 for electric cars, paid either at the point of sale or as a reimbursement after registration.

3. Scrappage‑Linked Benefits

   Some regions, including Gujarat, link EV incentives to the scrapping of an old petrol/diesel vehicle. If you surrender a polluting vehicle for de‑registration, you can claim an additional one‑time subsidy when buying an EV.

Visit your state transport department’s EV incentive portal or speak with your dealer to understand which benefits apply in your city or district.

• Look for benefits under business expense provisions
• Explore newer incentives that may be announced under upcoming budgets or green energy policies

Conclusion

Section 80EEB offers a clear advantage for individuals who financed an electric vehicle during the eligible window. With a deduction of up to ₹1.5 lakh on loan interest, it makes EV ownership not just sustainable but also financially rewarding.

While this benefit is now limited to loans sanctioned on or before 31st March 2023, it continues to provide annual tax relief to many taxpayers. If you qualify, ensure you claim your electric vehicle deductions 80EEB properly with all the required documentation.

For future EV buyers, it’s advisable to keep an eye out for new incentives in upcoming budgets. The push for electric mobility is expected to grow, and tax benefits may evolve accordingly.

Additional Read: Income Tax: Basics of Income Tax for Beginners | Mirae Asset
Additional Read: Income Tax Return in India: How to File ITR & ITR Slabs