Are there any tax advantages for purchasing an electrical automobile on mortgage? Sure, in an effort to promote electrical automobile utilization, the Authorities got here out with this new Part 80EEB the place the mortgage taken for the acquisition of an electrical automobile may be claimed as a deduction like how one can declare the decution on your housing mortgage curiosity.
Part 80EEB has been inserted from the evaluation 12 months 2020-21. Underneath this part, the deduction is on the market if the next circumstances are happy.
Part 80EEB – Tax Profit for electrical automobile buy mortgage
The circumstances talked about beneath this part for eligibility are as beneath.
# The assessee is a person. Therefore, the deduction shouldn’t be out there for others.
# He has taken a mortgage for the aim of buy of an electrical automobile. For this goal, an “electrical” automobile means –
- A automobile that’s powered “solely” by an electrical motor whose traction vitality is equipped solely by a traction battery put in within the automobile.
- It has such an electrical regenerative braking system, which throughout braking gives for the conversion of auto kinetic vitality into electrical vitality.
Because the phrase “unique” is used, curiosity on a mortgage taken for the acquisition of a “hybrid automotive” (which derives a few of its energy from a traditional engine like petrol/diesel) shouldn’t be eligible for deduction.
# Mortgage is taken from a monetary establishment (like a financial institution or any deposit-taking NBFC or a systematically essential non-deposit-taking NBFC).
# Mortgage needs to be sanctioned through the interval of 1st April 2019 to thirty first March 2023 (Means from FY 2019-20 to FY 2022-23).
# Nonetheless, the interval of profit is on the market until the compensation of the mortgage continues.
How a lot tax deduction is on the market beneath Part 80EEB?
If the above-said circumstances are happy, then a person can declare a deduction beneath Part 80EEB. The deduction is on the market in respect of the curiosity payable on the above mortgage or Rs.1,50,000, whichever is much less. As I discussed above, the deduction is on the market from FY 2019-20 and subsequent evaluation years.
Word that the identical curiosity shouldn’t be deductible twice. If curiosity is claimed as deduction beneath part 80EEB, then such curiosity shouldn’t be once more deductible beneath another provision of the act for a similar or another evaluation years.
It’s important to acquire the curiosity paid certificates and preserve the mandatory paperwork similar to tax invoices and mortgage paperwork useful on the time of tax submitting.
Based mostly on the above info we’ve to grasp that as of now, the tax profit is on the market just for the loans sanctioned from FY 2019-20 to FY 2022-23. Nonetheless, there is no such thing as a such restriction on what needs to be the time period of the mortgage as tax advantages on such mortgage may be claimed up the closure of the mortgage.
Is it smart to go for mortgage whereas buying electrical automobile?
Upfrontly in the event you look into the tax profit, you might be compelled to guage that it’s smart. Nonetheless, in the event you assume logically, then there is no such thing as a tax profit in it. Allow us to assume that there are two people (Mr.A and Mr.B) whose tax laibility is identical and falling beneath 30% tax bracket.
Mr.A took electrical vehilce mortgage. Assume that the curiosity paid throughout annually is Rs.1,50,000. In that case, up frontly he can save Rs.45,000 tax.
Mr.B doesn’t have any such mortgage. Therefore, he has to pay Rs.45,000 tax on his Rs.1,50,000 revenue.
When you look properly, Mr.A by saving Rs.45,000 tax DONATING Rs.1,05,000 to the financial institution within the type of curiosity. Nonetheless, Mr.B by paying Rs.45,000 tax (as he doesn’t have mortgage), retaining Rs.1,05,000 in his pocket.
Therefore, don’t run for availing mortgage whereas buying electrical automobile (particularly if the intention is just for tax saving). That additionally avialing mortgage on such a depreciating asset is another dangerous solution to handle your cash. Assume properly. Simply because authorities introduced sure tax incentives for such automobile purcahse doesn’t imply we blindly need to rush in.