EVs Not Just Good For Environment, But Can Save Tax Too: Here’s How

While EVs are good for the environment with their negligible carbon footprint, they can also help customers save lakhs on taxes.

Auto Expo 2023 saw the launch of several new EVs, including the Hyundai Ioniq 5

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From Hyundai Ioniq 5 and MG Euniq 7 to Kia KA4 and BYD Atto 3, several electric vehicles (EVs) have been unveiled at the Auto Expo 2023, sending a clear signal into the future buying trends among auto enthusiasts in the country. Over 14 lakh EVs ply Indian roads currently, with sales seeing a 210 percent year-on-year (YoY) jump in 2022. While EVs are good for the environment with their negligible carbon footprint, they can also help customers save lakhs on taxes. 

Section 80EEB benefits

In Union Budget 2019, the Centre announced Section 80EEB (starting AY 2020-21) which offers a handy deduction for interest paid on loan taken to purchase an EV.

Eligibility

Tax deduction under Section 80EEB is applicable only to individuals. A firm or company or similar body cannot avail of the deduction.

It should be noted that Section 80EEB will not be applicable to hybrid cars. 

Amount

Interest payments up to Rs 1.5 lakh can be deducted under Section 80EEB. 

Period

The deduction will be available for the entire period when the loan is being paid. 

At the time of writing, Section 80EEB is applicable to EVs bought within March 31, 2023. However, with the upcoming Budget 2023, it can be expected that this tax benefit can be extended by two more years, up to March 31, 2025. 

GST, road tax reduction

As an added incentive, the Centre has also reduced Goods and Services Tax (GST) on EV sales to 5 percent, down from 12 percent. 

On top of that, several states have also announced waivers of road tax on EV purchases. Maharashtra has announced subsidy on road tax up to Rs 1.5 lakh. Tamil Nadu has proposed to extend 100 percent road tax exemption for EVs for an additional three years in November 2022.