The Fame India Scheme was launched by the Indian government in 2015 to encourage the use of electric and hybrid vehicles. “Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India” is what FAME stands for.The buyers can take benefit of incentives under this scheme in the form of subsidies, which lower the real cost of the EV.
The scheme was initiated by the Ministry of Heavy Industries and Public Enterprises and is a part of the National Electric Mobility Mission Plan.
The central and state governments in India are offering substantial subsidies to the buyers who want to purchase an EV . The initial cost of purchasing a new EV is getting reduced as a result of the concession being provided. EVs are becoming increasingly accessible and affordable to the common people.The incentives are calculated on the basis of the size of the Li-ion battery pack on a two-wheeler.
According to the most recent regulations, the Indian government would give EV buyers incentives worth Rs 10,000/kWh subject to maximum of 15% of the entire EV value.
State subsidy may be provided directly or indirectly. Many states in India compensate customers with a reduction in road tax instead of providing direct subsidy on the cost of the vehicle.
Sec. 80 EEB - Exemption under Income Tax Act on Purchase of Electric Vehicle
Besides the subsidy offered by the government, the buyers also get income tax benefits on the interest paid on the loan taken specifically for the purchase of the electric vehicle under Sec 80 EEB of Income Tax Act.
Income tax benefits under this section is available only if the loan is approved between 1 January 2019 and 31 March 2023.
Who are elegible to claim deduction under sec 80 EEB ?
Only Individuals can claim deduction under this section. This deduction is not available to any taxpayer other than individual e.g. HUF,AOP,BOI, Partnership Firm, LLP, Company, etc.
The deduction is available even if the EV is used for personal purpose or for the purpose of business. If the EV is used for the purpose of the business, the EV should be registered under the name of the individual.
The loan must be taken from the financial institutions or from Non-Banking Financial Institutions ( NBFCs) while purchasing EV.
Scale of Deduction
The deduction is available up to Rs 1,50,000 on the interest paid on the loan taken specifically for the purchase of the electric vehicle.
If the EV is used for the business purpose, then any interest paid above Rs 1,50,000 can be claimed as business expenses.
Important Definitions
For the purposes of this section,—
(a) “electric vehicle” means a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy;
(b) “financial institution” means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act and includes any deposit taking non-banking financial company or a systemically important non-deposit taking non-banking financial company as defined in clauses (e) and (g) of Explanation 4 to section 43B.]