Deduction in respect of purchase of electric vehicle
[Section-132 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 132(1) of Income Tax Act 2025
132(1) An assessee, being an individual, shall be allowed a deduction of interest payable on loan taken by him from any financial institution for the purpose of purchase of an electric vehicle, as per the provisions of this section.
Section 132(2) of Income Tax Act 2025
132(2) The deduction under sub-section (1) shall be subject to the condition that the loan has been sanctioned by the financial institution during the period beginning on the 1st April, 2019 and ending with the 31st March, 2023.
Section 132(3) of Income Tax Act 2025
132(3) The deduction under sub-section (1) shall not exceed one lakh fifty thousand rupees and shall be allowed in computing the total income of the individual for the tax year beginning on the 1st April, 2019 and subsequent tax years.
Section 132(4) of Income Tax Act 2025
132(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provision of this Act for the same or any other tax year.
Section 132(5) of Income Tax Act 2025
132(5) In this section,—
- (a) “electric vehicle” means a vehicle 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; and
- (b) “financial institution” means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act and includes a non-banking financial company.
FAQs on Section 132 of Income Tax Act 2025
Who is eligible to claim the deduction under Section 132?
Only individuals are eligible to claim the deduction under Section 132 of the Income Tax Act, 2025.
What type of loan qualifies for the deduction?
The loan must be taken from a financial institution for the purpose of purchasing an electric vehicle.
Is there a time limit for when the loan must be sanctioned?
Yes, the loan must have been sanctioned between 1st April, 2019 and 31st March, 2023.
What is the maximum amount of deduction allowed under Section 132?
The maximum deduction allowed is ₹1,50,000 in a tax year.
Can the deduction be claimed in multiple tax years?
Yes, the deduction can be claimed for the tax year beginning 1st April, 2019 and subsequent tax years, subject to the overall limit.
Can this interest deduction be claimed under any other section of the Act?
No, once a deduction is claimed under Section 132, it cannot be claimed under any other provision of the Act for the same or any other tax year.
What is the definition of an “electric vehicle” for the purpose of this section?
An electric vehicle is one powered exclusively by an electric motor, with energy supplied only by a traction battery installed in the vehicle, and must have an electric regenerative braking system that converts kinetic energy into electrical energy during braking.
What is meant by a “financial institution” in this context?
A financial institution includes banking companies governed by the Banking Regulation Act, 1949, any bank or banking institution under section 51 of that Act, and non-banking financial companies (NBFCs).
Can a deduction be claimed if the vehicle is purchased after 31st March, 2023?
Yes, the vehicle can be purchased later, but the loan must have been sanctioned during the eligible period (1st April, 2019 to 31st March, 2023).
Is the deduction available for loans taken for hybrid or partially electric vehicles?
No, the vehicle must be powered exclusively by an electric motor and meet the definition of “electric vehicle” under Section 132(5)(a).
Can a person claim deduction under Section 132 for multiple electric vehicles?
The Act does not restrict the number of vehicles, but the deduction is limited to the interest payable and subject to the overall limit of ₹1,50,000 per year.
What if the loan is taken jointly with another person?
Only the individual who has taken the loan and pays the interest can claim the deduction, provided all conditions of the section are met.
Can the deduction be claimed if the electric vehicle is used for business purposes?
Yes, the Act does not restrict the use of the vehicle, but deduction under Section 132 is specifically for individuals and only in respect of interest on the loan for purchase of an electric vehicle.
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