Page 30 - Union Budget_2019

Union Budget 2019

6.2 Tax incentive for electric vehicles

With a view to promote alternative fuel for vehicles, reduce pollution and improve environment, it is

proposed to insert a new Section 80EEB.

The new section shall provide for a deduction of upto Rs.1,50,000 in respect of interest on loan taken by an

individual from any financial institution for the purchase of electric vehicle, subject to following condition.

• the loan has been sanctioned during the period beginning on the 1st April, 2019 to 31st March, 2023;

• the assessee does not own any other electric vehicle on the date of sanction of loan.

It is also proposed that where a deduction is claimed under this section, no deduction shall be allowed under
any other provisions for same or any other assessment year.

“Electric vehicle” means a vehicle which is powered exclusively by an electric motor whose traction energy
is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking
system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy;

“Financial institution” means a banking company to which the Banking Regulation Act, 1949 applies, or any
bank or banking institution referred to in section 51 of that Act (corresponding new bank of SBI, regional
rural bank or any subsidiary bank) and includes any deposit taking non-banking financial company or
a systemically important non-deposit taking non-banking financial company as defined in proposed

amendment relating to Section 43B earlier.

This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to assessment
year 2020-2021 and subsequent assessment years.

The above amendment shall provide greater impetus to the Government’s focus on going green at
unprecedented pace. The caveat here is the fact that the exemption is available only if loans are

obtained from banks and large NBFCs and not from smaller lenders and NBFCs.

Further, the said deduction shall benefit only the salaried assessees and not the business assessees as

they can claim the deduction of entire interest on loan taken for business under Section 36(1)(iii). Thus,
if an electric vehicle is taken on loan and used for business, the deduction of interest paid on such loan

can be claimed entirely under Section 36(1)(iii). Such interest shall not be available as a deduction
under the proposed Section 80EEB.

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