MUMBAI: Tax experts are hoping that the forthcoming Budget 2025 will provide sops for purchase of electronic vehicles (EVs) and also usher in clarity as regards computing perquisite value in case of a company provided car.
Under the earlier provision of Section 80EEB of the Income-tax Act, tax concession of up to Rs. 1.5 lacs on interest against loans for buying EVs was available if the loan was availed between April 1, 2019 to March 31, 2023. “While the government had not extended this tax concession for loan sanctions post March 31, 2023, considering the need of the hour for encouraging EV sales it is imperative for extending such tax concession at least till 2030,” said Abhishek Mundada, partner at Dhruva Advisors.
Some individuals are provided a car by their employer. When the car is used for both personal and official needs, the car’s cubic capacity determines the value of perquisite, which is taxable under the head ‘Salary’. For cars which are of up to 1.6 litres cubic capacity, the perquisite value is Rs. 1,800 per month and Rs. 2,400 for cars with higher capacities. Any running and maintenance expenses of the car that the employer pays are also part of the perquisite value. If the organization also provides a driver, Rs. 900 per month will be added to the taxable perquisite value.
In this context, Divya Baweja, tax partner, Deloitte India states, “Rule 3 of the Income tax rules provides the valuation of motor car benefits, where the employer reimburses running and maintenance expenses. The valuation principles consider the cubic capacity of the engine to determine the perquisite value and typically cover only conventional fuel cars; no separate criteria have been laid out with respect to electric vehicles.”
“Given the encouragement to use electric vehicles, Rule 3 could be suitably amended to bring in the valuation mechanism for hybrid and electric vehicle maintenance (recharging batteries in lieu of fuel) and criteria based on battery capacity (besides the engine capacity). This valuation mechanism would help bring much-required clarity, which could, in turn, promote the use of electric vehicles and even pave the way for a greener future,”he adds.