Section 132 · Deductions
Section 132 of the Income-tax Act, 2025 — Deduction for Interest on Loan to Buy an Electric Vehicle (old Section 80EEB)
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter VIII
📜 What the law says — Section 132, 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.
(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 on the 31st March, 2023.
(3) The deduction under sub-section (1) shall not exceed ` 150000 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.
(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.
(5) For the purposes of 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;
(b) “financial institution” means a banking company to which the Banking
Regulation Act, 1949 (10 of 1949) applies, or any bank or banking insti-
tution referred to in section 51 of that Act and includes a non-banking
financial company.
Deduction in respect of donations to certain funds, charitable institutions, etc.
133. (1) In computing the total income of an assessee, there shall be deducted,
as per and subject to the provisions of this section,—
(a) the whole of the aggregate of the sum or the sums paid by the assessee,
in the tax year as donations to—
(i) the National Defence Fund set up by the Central Government; or
(ii) the Prime Minister’s National Relief Fund or the Prime Minister’s
Citizen Assistance and Relief in Emergency Situations Fund (PM
CARES FUND); or
(iii) the Prime Minister’s Armenia Earthquake Relief Fund; or
(iv) the Africa (Public Contributions-India) Fund; or
(v) the National Children’s Fund; or
(vi) the National Foundation for Communal Harmony; or
(vii) a University or any
In plain language
What Section 132 is about
Section 132 of the Income-tax Act, 2025 lets an individual claim a deduction for the interest paid on a loan taken to buy an electric vehicle (EV). It is the re-numbered version of the old Section 80EEB of the Income-tax Act, 1961 — the wording and limits have been carried forward almost unchanged into the new law that applies from 1 April 2026. Think of it as a reward for going green: the government subsidises part of your EV loan cost by cutting your taxable income.
How much you can deduct
- Maximum ₹1,50,000 per year of interest on the EV loan.
- The deduction is only for interest — not the principal repayment, road tax, insurance or the cost of the vehicle itself.
- It is available year after year until the loan is fully repaid, as long as you keep paying interest and stay within the ₹1.5 lakh annual ceiling.
Who can claim it
- Only individuals — resident or non-resident. A HUF, firm, LLP, company, AOP or any other entity cannot claim it.
- The EV can be used for personal or business purposes. If it is used for business and the interest exceeds ₹1.5 lakh, the extra interest can be claimed as a business expense (but you cannot double-claim the same interest).
Key conditions you must satisfy
- Loan sanction window: the loan must have been sanctioned between 1 April 2019 and 31 March 2023. This is the single biggest catch — no new EV loans sanctioned after 31 March 2023 qualify. The benefit continues only for those who already locked in a qualifying loan during that window.
- Lender must be a "financial institution": a bank (under the Banking Regulation Act, 1949) or a non-banking financial company (NBFC). A loan from an employer, friend, relative or dealer-finance that is not an NBFC does not qualify.
- What counts as an electric vehicle: a vehicle powered exclusively by an electric motor, drawing energy only from a traction battery, and fitted with an electric regenerative braking system. This covers electric cars, e-scooters and e-bikes — but hybrids and CNG/petrol vehicles do not qualify.
No double deduction
If interest is claimed under Section 132, the same interest cannot be claimed again under any other provision of the Act, in the same year or any other year. So you cannot claim it both here and as a business deduction.
Old regime vs new regime — very important
Section 132 is a Chapter VIII deduction. Under the default new tax regime (Section 115BAC), almost all such deductions — including EV loan interest — are not allowed. To claim Section 132 you must opt for the old tax regime. Compare the tax saved under the old regime (with this deduction) against the lower slab rates of the new regime before deciding.
Practical implications
- Keep the loan sanction letter (to prove the 2019–2023 window), the bank/NBFC interest certificate, and the vehicle invoice / RC.
- The deduction is claimed while filing your ITR — there is no separate form; you enter the eligible interest in the deductions schedule.
- Since fresh loans no longer qualify, this section now mainly benefits taxpayers still repaying an EV loan sanctioned before April 2023.
💡 Example
Example 1 — full benefit: Ridhi took a ₹12,00,000 loan from an NBFC in June 2022 (within the 1 Apr 2019–31 Mar 2023 window) to buy an electric car. In FY 2026-27 she pays ₹1,80,000 as interest. Under Section 132 she can deduct only the capped amount of ₹1,50,000. If she is in the 30% slab under the old regime, this saves her roughly ₹46,800 in tax (including 4% cess). The remaining ₹30,000 of interest gives no benefit.
Example 2 — small loan: Arjun financed an e-scooter with a ₹90,000 bank loan sanctioned in 2021. His annual interest is only ₹9,500. He can deduct the entire ₹9,500 (well below the ₹1.5 lakh cap). At a 20% slab, he saves about ₹1,976 in tax that year, and can keep claiming the interest each year until the loan ends.
A short story: Meera, a Bengaluru software engineer, bought an EV on a loan sanctioned in March 2023 — just days before the window closed. Her colleague Sam waited and got his loan sanctioned in April 2023, thinking timing didn't matter. When they filed returns, Meera claimed ₹1.5 lakh under Section 132 every year while Sam got nothing — because his loan was sanctioned one month too late. The lesson: with Section 132, the loan sanction date decides everything.
| Feature | Section 132, Income-tax Act 2025 (old 80EEB) |
|---|
| Who can claim | Individuals only (resident or non-resident) |
| Maximum deduction | ₹1,50,000 per tax year (interest only) |
| Loan sanction period | 1 April 2019 to 31 March 2023 |
| Eligible lender | Bank or NBFC (financial institution) |
| Eligible vehicle | Vehicle run only by electric motor with traction battery and regenerative braking |
| Purpose of use | Personal or business |
| Duration of benefit | Every year until loan is fully repaid |
| Double claim on same interest | Not allowed under any other section |
| Available under new regime (115BAC)? | No — only under the old tax regime |
Related sections
Section 115BAC — Default new tax regime and disallowed deductions Section 80EEB (1961 Act) — Predecessor EV loan interest deduction Section 24 — Deduction for interest on home loan Section 133 — Deductions for donations (old 80G) in Chapter VIII Section 123 — Deduction for life insurance, PF and other savings (old 80C) Section 28 — Interest as a business expense where EV is used for business
Frequently asked questions
Can I claim Section 132 if my EV loan was sanctioned in 2024 or 2025?
No. Only loans sanctioned between 1 April 2019 and 31 March 2023 qualify. Loans sanctioned after 31 March 2023 get no deduction under Section 132.
Is the ₹1.5 lakh limit on interest or on the loan amount?
It is on the interest paid in a year, not the loan or the vehicle price. You can deduct up to ₹1.5 lakh of interest each year until the loan ends.
Can I claim this deduction under the new tax regime?
No. Section 132 is a Chapter VIII deduction that is not allowed under the default new regime (Section 115BAC). You must opt for the old regime to claim it.
Does a hybrid or CNG car qualify?
No. The vehicle must run exclusively on an electric motor powered by a traction battery with regenerative braking. Hybrids and fuel-based vehicles do not qualify.
Can a company or partnership firm claim Section 132?
No. The deduction is available only to individuals. HUFs, firms, LLPs, companies and other entities are excluded.
Can I claim both Section 132 and business interest on the same EV loan?
You cannot claim the same interest twice. If the EV is used for business and interest exceeds ₹1.5 lakh, the excess may be claimed as a business expense, but never the same amount under two sections.
What documents do I need to claim the deduction?
Keep the loan sanction letter showing the 2019–2023 date, the interest certificate from the bank or NBFC, and the vehicle invoice or registration certificate.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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