Electric Vehicle Tax Exemption – Complete Guide to EV Benefits

Key Insights 

1. You can save on taxes by using Section 80EEB, which lets you deduct up to ₹1,50,000 each year from your taxable income for the interest paid on your EV loan.

2. To qualify for the electric vehicle tax exemption, you must be an individual taxpayer who took a loan from a bank or NBFC approved by April 1, 2019, to buy a new, fully electric vehicle.

3. Make sure you have your interest certificate, loan agreement, EV purchase invoice, and RC ready so you can easily claim your deduction under the new tax rules.

Switching to an electric vehicle can save you money. You can learn about the electric vehicle tax exemption in India and the electric vehicle tax benefits in the new tax regime, which can help reduce your tax bill and support the environment.

These exemptions help you reduce your financial burden. The electric vehicle tax exemption section in the Income Tax Act lowers your costs. 

The government uses a specific electric vehicle tax benefit in India 2025, which offers deductions on interest paid, making owning an electric vehicle more affordable.

Last year, I bought an EV for ₹15,00,000. I claimed the deduction under Section 80EEB and used the electric vehicle tax exemption limit of ₹1,50,000 on loan interest. This saved me over ₹45,000 in taxes and made my eco-friendly choice a smart financial decision.

Eligibility Criteria for Electric Vehicle Tax Exemption

Are you considering claiming an EV tax break? Check these main eligibility criteria to find out if you qualify for the exemption.

• Taxpayer status: Only individual taxpayers can apply. Companies, HUFs, and similar entities are not eligible.
• Loan source: The loan should come from a bank or a Non-Banking Financial Company (NBFC). Loans from private individuals do not qualify.
• Loan sanction period: The loan must be approved by April 1, 2019.
• Vehicle type: The vehicle must be a new electric vehicle powered only by an electric motor. Neither traditional nor hybrid vehicles qualify. Vehicles are excluded.

Follow these key steps to qualify for EV tax savings and get more value from your eco-friendly investment.

Bonus Tip: Did you know that the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME)-II scheme entered its second phase on 1 April 2019 and runs for three years with a budget of ₹10,000 crore?

Deduction Limits Under Electric Vehicle Loan Tax Exemption (80EEB)

Section 80EEB of the Income Tax Act lets you claim a deduction of up to ₹1,50,000 on the interest paid for a loan taken to buy an electric vehicle. You can use the vehicle for personal or business reasons. This deduction helps lower the total interest you pay on your loan.

If you use the car for business, you can claim a deduction of up to ₹1,50,000 under Section 80EEB. Any interest paid beyond this amount can be claimed as a business expense, but only if the car is registered in the business owner's name.

You can save up to ₹1,50,000 on interest for your EV purchase under Section 80EEB, helping lower your personal and business expenses.

Required Documents for Electric Vehicle Tax Exemption

Are you planning to claim your EV tax benefit? Make sure you have these documents ready so you can get your Section 80EEB deduction without any hassle.

Here is the list of required documents for the electric vehicle tax exemption:

Collect these important documents to claim your Section 80EEB deduction and help make your eco-friendly EV purchase a smart financial choice.

How to Claim 80EEB Deduction in ITR? 

If you want to save on taxes by buying an electric vehicle, this guide explains how to claim the Section 80EEB deduction in your income tax return.

After you enter your income details, find the deductions section under Chapter VI A. Select Section 80EEB and fill in your loan amount, sanction date, interest rate, and the interest you paid.

If you use a Chartered Accountant or tax professional to file your returns, give them your loan details so they can claim the 80EEB deduction for you.

I bought an EV for ₹12,00,000 with a loan approved on June 1, 2023. This year, I paid ₹85,000 in interest. When I filed my ITR online, I went to “Chapter VI-A Deductions,” selected Section 80EEB, and entered the following details.

Loan Amount (₹12,00,000), Sanction Date (01/06/2023), and Interest Paid (₹85,000). This reduced my taxable income and saved me ₹26,500 in taxes. I also gave my CA the loan certificate to support the claim.

You can claim your 80EEB deduction to lower your taxable income and save money on your eco-friendly purchase.

Conclusion 

You can save more by using Section 80E as you plan. If you are interested in eco-friendly options, check out the electric vehicle tax exemption and the electric vehicle tax benefit in India for 2025 under the electric vehicle tax benefit in new tax regime.

FAQs

Will I get a tax benefit if I buy an EV on EMI?  

You can claim a tax benefit of up to ₹1,50,000 on the interest paid for an electric vehicle (EV) loan under Section 80EEB of the Income Tax Act.

How can you save money with the tax exemption under Section 80EEB?  

If you have taken a loan to buy an electric vehicle, you can claim a deduction of up to ₹1,50,000 per year on the interest you pay under Section 80EEB. This lowers your taxable income and reduces the tax you owe.

What is the additional electric vehicle tax exemption limit?  

If you take a loan to buy an electric vehicle in India, you can claim a tax deduction of up to ₹1,50,000 on the interest paid, as per Section 80EEB of the Income Tax Act. This benefit is available every year for individual taxpayers whose loans were approved between April 1, 2019 and March 31, 2023. The deduction applies only to the interest paid, not the principal amount.

Do all-electric cars have exemptions from “vehicle taxes” in every state/country where they are sold? What is the reason for this? 

No, all-electric cars (EVs) are not exempt from vehicle taxes everywhere. Tax policies differ by state and country. Some places give exemptions or lower rates to encourage EV use, while others add new fees or end exemptions to offset lost fuel tax revenue.

For how long can I claim a deduction under Section 80EEB?

You can claim deductions until you finish repaying your loan, as long as you meet the other requirements.
 

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About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.