You can save up to Rs 1.50 lakh tax on buying electric vehicle - here's how

Individuals falling into the income tax slabs have started scrambling various options to reduce their tax liability, as the financial year-end is drawing closer. 

For those falling under the Old Tax regime, there are several options available to save tax and maximise savings. Some of the best tax-saving instruments include, Life Insurance (Rs 1.5 lakhs) under Section 80C and Section 10(D), PPF (Rs 1.5 lakhs) under Section 80C and Section 10(D), NPS (Rs 1.5 lakhs) Under Section 80CCD, Pension (Rs 1.5 lakhs) Under Section 80CCC, Senior Citizens Saving Schemes Under Section 80C and ELSS Funds. 

It is significant to remember that the tax structure you decide on will have an impact on your deductions.

The government of India has announced no tax for those with annual income of up to Rs 7 lakh. The announcement was made for those under the new tax regime in the Union Budget 2023-24.

No changes have been made for those who continue in the old regime in this year's Union Budget. The old regime provides for tax exemptions and deductions on investments and expenses such as HRA.

Amongst the various tax saving investments, buying an electric vehicle (EV) has become one of the most lucrative ways to reduce the tax liability. 

Under Section 80EEB, you can claim a tax deduction of up to Rs 1,50,000 for the interest repayment for a loan taken for the purchase of an electric vehicle. To be eligible, the loan should have been sanctioned between 1st April 2019 and 31st March 2023. 

Section 80EEB - Deduction On Purchase Of Electric Vehicle

In the union budget 2019, the government announced an incentive for purchase of electric vehicles allowing a deduction for interest paid on loan taken for the purchase of electric vehicles from the AY 2020-21.

Section 80EEB - Eligibility criteria

1) Applicable to individual taxpayers

2) Loan for EV can either be for personal use or business use. 

3) Loan sanction period should be between the 1st of April 2019 and the 31st of March 2023.

Budget 2023: Old vs New Tax regime - What has changed | New Income Tax regime standard deduction

Budget 2023 announcements for Electric Vehicles 

Finance Minister Nirmala Sitharaman slashed the custom duty on lithium batteries from 21 per cent to 13 per cent. Lithium batteries are used in many products such as electronics, toys, wireless headphones, electric vehicles and electrical energy storage systems. 

Customs duty exemptions are extended to the import of capital goods and machinery required for lithium and ion cells for batteries used in EVs. Hence, this move is likely to make EVs cheaper.

The automobile industry termed the Budget for 2023-24 as growth-oriented, saying the proposed measures will drive sustainable yet inclusive growth at a rapid pace.

Automobile industry body Society of Indian Automobile Manufacturers President Vinod Aggarwal said a 33 per cent increase in capital outlay with an effective provision of Rs 13.7 lakh crore will spur growth in the economy, resulting in a positive impact on the domestic automobile industry.

Automobile dealers' body FADA President Manish Raj Singhania said the capital outlay of Rs 10 lakh crore in infrastructure spending will aid CV sales. 

Society of Manufacturers of Electric Vehicles Director General Sohinder Gill said that after passing through a difficult period of lack of good quality "Made in India" EV components for the last 2 years, the local supply chains are beginning to take shape and the increase in customs duty on SKD/CBU is therefore timely as it will further incentivise the local suppliers because of the relative price advantage.

Finance Minister Nirmala Sitharaman has proposed to further provide impetus to green mobility. "Customs duty exemption is being extended to import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles," she stated.

Hero Electric Managing Director Naveen Munjal said the Budget reflects the government's inclination to support the EV transition, enabling the creation of a carbon-free nation that thrives on sustainable, futuristic and alternative fuel technology.

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