Everything You Didn't Know About EV Loan Tax Benefits
Everything You Didn’t Know About EV Loan Tax Benefits
Electric vehicles (EVs) have surged in popularity as more people look to reduce their carbon footprint and save on running costs. But beyond the environmental perks, owning an EV also comes with several tax benefits—especially when financed through an EV loan.
If you’re considering buying an electric vehicle, here’s everything you might not know about the tax benefits related to EV loans in India.
1. Interest Deduction Under Section 80EEB
One of the biggest financial advantages of an EV loan is the tax deduction on the interest paid. Under Section 80EEB of the Income Tax Act, individual taxpayers can claim a deduction of up to ₹1.5 lakh per year on the interest paid on loans taken to purchase electric vehicles.
Key Points:
Applies only to loans taken for new electric vehicles (cars, scooters, bikes).
The deduction is available for the interest component only, not the principal.
Available for a maximum of 8 years from the loan sanction date.
Applies whether you buy the EV outright or through financing.
2. Subsidies Don’t Affect Tax Benefits
Government subsidies like the FAME II scheme or state incentives reduce the purchase price but do not affect your eligibility for Section 80EEB interest deductions. You can claim both subsidies and tax benefits simultaneously, maximizing your savings.
3. No Limit on Loan Amount for Tax Deduction
Unlike other sections like 80C or 24, there’s no upper limit on the loan amount for the interest deduction under Section 80EEB. Whether your loan is ₹5 lakh or ₹20 lakh, the tax benefit applies to the interest paid up to ₹1.5 lakh annually.
4. Eligibility Criteria for Claiming the Deduction
To claim the EV loan interest deduction:
The vehicle must be registered in your name.
The loan should be taken from a recognized financial institution or bank.
The EV must be new and used for personal or business purposes.
You must have valid loan repayment documents and interest certifi