Benefits under income tax for purchase of an electric vehicles

Deductions and depreciation on an electric vehicles

Depreciation rate on electric vehicles

E-vehicles, green vehicles, EVs are the new buzzwords in the market. Driving an electric vehicle can help to reduce carbon footprint because there will be zero tailpipe emissions. E cars are good for environment and also there are certain benefits available under income tax act. So lets understand the tax benefits on E-vehicle

Tax Benefits on e-vehicle for all class of Individual taxpayers:

If you are planning to buy an e-car and wants to avail loan for buying an e-car then you can get a deduction up to Rs. 1,50,000 under section 80EEB of the Income tax act of the interest paid on loan taken to buy Electric vehicles rom your total income .

Condition to avail deduction u/s 80EEB is that, the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2023.

Benefits for business taxpayers

Along with deduction of Rs. 1,50,000 under section 80EEB (for above mentioned period), business firms can claim depreciation @ 40% on electric vehicles if vehicle used for business purpose.

Additional Government Incentives

    1. GST rate reduction:
      • The Goods and Services Tax (GST) rate on electric vehicles has been reduced from 12% to 5%, making EVs more affordable for both individuals and businesses.
    2. Exemption from Road Tax and Registration Costs:
      • In many states, electric vehicles are exempt from road tax and registration costs, further reducing the overall ownership cost.
    3. Exemption from Green Tax:
      • Some states also provide exemption from green tax on electric vehicles, which is another financial incentive to encourage their adoption.
    4. Upfront incentives (subsidy):
      • FAME-II Scheme & PM E-DRIVE Scheme launched by the government for promoting the adoption of electric vehicles (EVs) in India.

Depreciation on electric vehicles (E-vehicle):

  • Depreciation rate as per income tax on electric vehicle is 40% under category “Electrically operated vehicles including battery powered or fuel-cell powered vehicles”. 
  • Under the Company Act, depreciation depends on useful life of an asset. As per company act 2013 depreciation rate is 11.88% if you follow SLM method and 31.23 for WDV method while useful life is 8 years.

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