Are there any tax advantages for getting an electrical car on mortgage? Sure, so as to promote electrical car utilization, the Authorities got here out with this new Part 80EEB the place the mortgage taken for the acquisition of an electrical car could be claimed as a deduction like how one can declare the decution to your housing mortgage curiosity.
Part 80EEB has been inserted from the evaluation 12 months 2020-21. Underneath this part, the deduction is offered if the next circumstances are happy.
Part 80EEB – Tax Profit for electrical car buy mortgage
The circumstances talked about below this part for eligibility are as beneath.
# The assessee is a person. Therefore, the deduction isn’t accessible for others.
# He has taken a mortgage for the aim of buy of an electrical car. For this function, an “electrical” car means –
- A car that’s powered “completely” by an electrical motor whose traction power is provided completely by a traction battery put in within the car.
- It has such an electrical regenerative braking system, which throughout braking supplies for the conversion of car kinetic power into electrical power.
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 standard engine like petrol/diesel) isn’t eligible for deduction.
# Mortgage is taken from a monetary establishment (like a financial institution or any deposit-taking NBFC or a systematically necessary non-deposit-taking NBFC).
# Mortgage ought to be sanctioned throughout 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 offered until the compensation of the mortgage continues.
How a lot tax deduction is offered below Part 80EEB?
If the above-said circumstances are happy, then a person can declare a deduction below Part 80EEB. The deduction is offered 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 offered from FY 2019-20 and subsequent evaluation years.
Word that the identical curiosity isn’t deductible twice. If curiosity is claimed as deduction below part 80EEB, then such curiosity isn’t once more deductible below some other provision of the act for a similar or some other evaluation years.
It’s a must to receive the curiosity paid certificates and preserve the mandatory paperwork similar to tax invoices and mortgage paperwork helpful on the time of tax submitting.
Primarily based on the above info we’ve to know that as of now, the tax profit is offered just for the loans sanctioned from FY 2019-20 to FY 2022-23. Nonetheless, there isn’t a such restriction on what ought to be the time period of the mortgage as tax advantages on such mortgage could be claimed up the closure of the mortgage.
Is it smart to go for mortgage whereas buying electrical car?
Upfrontly should you look into the tax profit, you’re compelled to guage that it’s smart. Nonetheless, should you assume logically, then there isn’t a tax profit in it. Allow us to assume that there are two people (Mr.A and Mr.B) whose tax laibility is similar and falling below 30% tax bracket.
Mr.A took electrical vehilce mortgage. Assume that the curiosity paid throughout every year 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 earnings.
If you happen to 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 car (particularly if the intention is just for tax saving). That additionally avialing mortgage on such a depreciating asset is yet another dangerous strategy to handle your cash. Suppose properly. Simply because authorities introduced sure tax incentives for such car purcahse doesn’t imply we blindly should rush in.