Ways to Save Tax on Electric Vehicles

Posted on: May 17, 2023 | | Written by:

Ways to Save Tax on Electric Vehicles

Published on May 16, 2023. EST READ TIME: 3 minutes

Internal combustion engines have been around for a while now. And the constantly rising cost of fuel makes it a bit challenging to maintain and run them. Thus, it isn’t surprising that electric vehicles have gained a lot of traction over the past few years. And with the government’s goal of emitting zero carbon, the push for electric vehicles has never been stronger. As a result, you can benefit from an electric vehicle tax exemption.

What is the meaning of an electric vehicle?

Cars that we commonly know run on internal combustion engines, which produce power and torque and transfer them to the wheels. Electric vehicles, on the other hand, use electric motor(s) instead of engines to produce power and torque. The electric motors draw power from a battery pack and use it for running the car. Unlike standard vehicles, electric vehicles have a different braking system. Every time you brake, the system converts the kinetic energy to electric energy and stores it back in the battery pack.

Section EEB for electric vehicles

Since there has been a strong push from the central government, the income tax laws were amended to make way for deductions. Thus, in 2019, Section 80EEB was introduced, which made way for an electric vehicle tax exemption. According to the amendment, if you avail of a loan to buy an electric vehicle, you can use the interest amount for tax exemptions. It would apply to the assessment years 2020-21 to 2022-23.

The section was introduced to make buying an electric vehicle more enticing. With electric car tax benefits, no pollutants, and lower running costs, it is hard to ignore electric vehicles.

Vehicles that qualify for Section 80EEB

To avail of electric car tax benefits under Section 80EEB, there are only a few very simple requirements. For starters, the vehicle in question must be equipped with an electric motor that draws power from a traction battery. The vehicles must have regenerative braking, which essentially converts the loss of energy while braking to electric energy and stores it in the car. All electric vehicles thus would qualify for deductions under Section 80EEB.

All about claiming deductions under Section 80EEB

Here is everything that you need to be aware of to claim an electric vehicle tax exemption.

1. You must have availed of a loan, specifically to buy an electric vehicle.

2. You can choose any financial institution or NBFC to take the loan.

3. Only individual taxpayers can avail of the benefits.

4. The benefits are limited to the interest amount of the loan.

5. The loan must be sanctioned between the assessment years 2020-21 to 2022-23.

6. You can only avail of deductions up to Rs 1,50,000.

7. Hindu undivided families, companies, partnership firms, and associations of a person cannot avail of these tax benefits.

Perks of buying an electric vehicle

Here are some of the perks that you get when you buy an electric vehicle.

1. No more PUC:

When you buy an electric vehicle, you no longer need to worry about PUC. Since the vehicles run on batteries, they do not emit any pollutants. Thereby, saving you a yearly trip to the pollution testing centres and keeping track of the document as well.

2. Lower tax rates:

Tax on electric vehicles is lower than on conventional cars. The central government recently reduced the GST on electric vehicles from 12% to 5%.

3. Tax exemptions:

Individuals can avail of tax exemptions on buying an electric vehicle with the help of Section 80EEB, as mentioned above.

4. Low running and maintenance costs:

One of the biggest perks of buying an electric vehicle is the low running and maintenance costs associated. Since the vehicles run on electricity, they run at only a fraction of the cost of an internal combustion vehicle. On the other hand, the lack of a lot of moving parts brings down the cost of maintenance to a large extent.

5. Green tax:

When you buy an electric car, you do away with the green tax. Green tax is charged when a vehicle owner registers their vehicle after 15 years. However, with electric vehicles, you need not worry about taxes.

6. Insurance:

You will need electric car insurance for your EV, as per the law. Should you select comprehensive car insurance for your EV, it will protect your car and your finances from any unforeseen events of the future. And provide you protection against any damages or injuries to third parties as well.

Why should you buy electric car insurance?

Some of the best electric cars in India do not come with a cheap price tag. The EV market is still maturing, and to make the cars more attractive, manufacturers are adding a lot of features. All this can make it even more important to invest in electric car insurance.

To receive all-around protection for your car, you can opt for comprehensive insurance . The policy will not only protect you financially in the event of an accident involving third parties but also cover damages to your car. Given the higher cost of the cars, it would be a rather sensible choice.

When you combine a comprehensive plan with the low tax on electric vehicles, it makes owning an electric vehicle that much easier and less of a hassle.

Conclusion

With access to some of the best electric cars in India , you can save a considerable amount of money on taxes as well as running costs. Given the benefits mentioned above, buying an electric vehicle can be more than a sensible decision. To safeguard your decision, it is essential that you opt for electric car insurance.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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