Section 132, Income-tax Act 2025: Deduction in respect of purchase of electric vehicle

What changed when Section 80EEB became Section 132?

The number and the vocabulary moved; the deduction did not. The 1961 Act carried the electric-vehicle loan interest deduction as Section 80EEB. The Income-tax Act 2025 re-enacts it, in substance unchanged, as Section 132, titled "Deduction in respect of purchase of electric vehicle". The ₹1,50,000 ceiling, the individual-only rule, the loan-sanction window and the old-regime-only limitation all carry over.

One thing is worth saying plainly, because the title misleads: Section 132 does not deduct the price of the vehicle. It deducts the interest on the loan you took to buy it. The purchase itself buys you nothing here; the interest is the whole deduction.

Section 132 is really a run-off provision now. Because a qualifying loan had to be sanctioned by 31 March 2023, no new buyer can start a claim. The section stays on the books so that borrowers who were already inside the window keep deducting their interest year after year, and the 2025 Act carries that run-off from TY 2026-27.

Section number and title cross-checked against multiple published copies of the enacted Act.†

Who can claim the Section 132 deduction?

Only an individual. A Hindu Undivided Family, a partnership firm, an LLP or a company cannot claim Section 132 at all, whatever vehicle it buys and however the loan is structured. Within that limit the section is relaxed about use: the electric car or two-wheeler can be for your personal use or for your business.

An individual qualifies when all of these hold:

• You are the borrower. The loan is taken by you from a financial institution to buy the electric vehicle, and you pay the interest out of income that is itself taxable.
• The loan was sanctioned inside the window. The sanction date falls between 1 April 2019 and 31 March 2023, the gate covered in the next section.
• You are on the old regime. Section 132 sits in the Chapter VIII deduction basket, which the default new regime switches off.

There is no residency bar in the section, so a non-resident individual who meets the conditions can claim, though few will. There is also no cap on the vehicle's price: unlike the purchase subsidies, Section 132 does not care whether the electric car cost ₹8 lakh or ₹80 lakh.

Why the loan sanction window decides who still qualifies

Everything turns on one date. The deduction is available only if the bank or NBFC sanctioned your loan between 1 April 2019 and 31 March 2023. Miss that window and Section 132 gives you nothing, however new your electric car is or however much interest you pay.

The window is shut. From 1 April 2023 a freshly sanctioned EV loan earns no deduction under this section. That is why Section 132 reads like a closing door: it does not invite new buyers in, it simply lets the people already inside keep claiming.

The run-off is the whole point of keeping the section alive. Take a loan sanctioned in March 2023 on a five-year tenure: you pay interest through roughly 2028, and each of those years, TY 2026-27 and TY 2027-28 among them under the new Act, you claim under Section 132. A loan from April 2019 on a seven-year tenure runs out around 2026. As those tenures end the pool empties on its own, so the section behaves like a sunset rather than a live benefit.

Which electric vehicles and lenders qualify?

Two boxes must both be ticked: a qualifying vehicle and a qualifying lender. The vehicle has to be a genuine electric vehicle, and the money has to come from a bank or an NBFC, not from a dealer's own credit or from family.

The Act defines an electric vehicle tightly: one powered exclusively by an electric motor, drawing its energy exclusively from a traction battery in the vehicle, with a regenerative braking system. The word doing the work is "exclusively". A hybrid that also burns petrol is not an electric vehicle for this section, however green it is.

† "Non-banking financial company" is read broadly here, so most vehicle-finance NBFCs are covered; the precise class of NBFC that qualifies is a lender-by-lender check, and the interest certificate is your evidence.

What are the deduction limit, the key dates and the regime?

The two columns are the same deduction on either side of the 2025 Act. What the new Act adds is only the section number and the "tax year" vocabulary. A borrower who claimed 80EEB on the FY 2025-26 return claims the identical amount as Section 132 from TY 2026-27, provided interest is still running on a loan sanctioned inside the window.

Whether the ₹1,50,000 is a yearly ceiling or a one-time aggregate cap is covered in the next section; the enacted text does not spell it out, and readings differ.†

How do you calculate the deduction?

Four steps, built on the lender's interest certificate:

• Get the interest certificate for the tax year. It splits each EMI into principal and interest and totals the interest you actually paid. Only the interest counts; the principal is never deductible here.
• Check the two gates: the loan was sanctioned between 1 April 2019 and 31 March 2023, and it came from a bank or an NBFC. If either fails, there is no deduction to compute.
• Cap the figure at ₹1,50,000. Deduct the interest paid, but not more than the ceiling; anything above ₹1,50,000 earns nothing under this section.
• Confirm you are on the old regime, then enter the amount in the deductions schedule of your return. On the new regime the figure deducts nothing, so the calculation is moot.

The income tax calculator linked below shows what the deduction is worth against your slab before you file.

Is the ₹1.5 lakh a yearly limit or a one-time cap?

This is the one genuinely unsettled corner, and it can change the deduction's value several times over. Section 132 says the deduction "shall not exceed ₹1,50,000" and is allowed "for the tax year beginning on the 1st April, 2019 and subsequent tax years". It does not say, in so many words, whether ₹1,50,000 is a ceiling for each year or a single limit for the whole loan.

The more common reading treats ₹1,50,000 as a yearly ceiling: each tax year you pay interest, you deduct it up to ₹1,50,000, for as long as the loan runs. On that reading a borrower with ₹1,40,000 of interest a year across a five-year run-off deducts close to ₹7 lakh in total, and the deduction is well worth having.

A more cautious reading treats ₹1,50,000 as the total the section will ever give on one loan, spread across the years. On that reading the same borrower stops at ₹1,50,000 of deduction in aggregate. The gap between the two, at the 30% slab, is the difference between roughly ₹46,800 and ₹2,18,400 of tax saved across the run-off.

Until the point is settled, the safe course is to claim on the same basis your earlier 80EEB returns used, keep the interest certificate for every year, and take a view with your accountant before a large multi-year claim. The worked examples below use the yearly reading and stay within a single year, where the two readings agree.

The yearly-versus-aggregate reading of the ₹1,50,000 ceiling is not spelled out in the enacted text, and practitioner readings differ.†

Personal use or business use: which route saves more?

If the electric vehicle is purely personal, Section 132 is your only route, and the ₹1,50,000 yearly ceiling is the most you get. If the vehicle is used for your business or profession, you have a second and often better route: treat the interest as a business expense.

Interest on money borrowed for the business is deductible in full while computing business income, with no ₹1,50,000 cap and under either regime. On a big loan whose yearly interest runs past ₹1,50,000, the uncapped business route beats Section 132 outright. The catch is that only the business share counts: use the vehicle 70% for work and 30% privately, and only 70% of the interest is a business expense.

You cannot do both with the same rupee. Section 132(4) blocks any interest deducted here from being deducted again under another provision, so a business owner picks one route. The rule of thumb: personal vehicle, use Section 132; business vehicle with interest above the cap, use the business-expense route; business vehicle with small interest and an old-regime filing, either works, so take the simpler one.

Is Section 132 available under the new regime?

No. Like the rest of the Chapter VIII deduction basket, the electric-vehicle interest deduction is an old-regime benefit only. Stay on the default new regime and Section 132 deducts nothing, whatever interest you paid.

That has a sharp consequence for most EV buyers. The new regime's rebate already zeroes tax up to ₹12 lakh of income, and its lower slabs beat the old regime for many middle incomes even before deductions. So Section 132 helps only if your income and your total old-regime deductions together are large enough to make the old regime win. The business-expense route is the exception: because it is part of computing business income rather than a Chapter VIII deduction, a business user keeps it under either regime.

Traps and edge cases

The corners where claims go wrong:

• The sanction date is the hard gate. A loan sanctioned on 1 April 2023 or later earns nothing, even by a day. Check the sanction letter, not the disbursement or the delivery date.
• The title misleads: only interest is deductible. The price of the vehicle, the road tax, the insurance and the principal part of every EMI get nothing under Section 132.
• Hybrids do not count. The vehicle must run exclusively on its electric motor and battery; a car that also has a petrol or diesel engine is outside the section.
• The lender must be a bank or an NBFC. Dealer trade credit, a personal loan spent on the car, a gold loan or a loan from family are all excluded, however you spend the money.
• One interest, one deduction. You cannot claim the same interest under Section 132 and as a business expense; pick one.
• It is old regime only. On the new regime the deduction is worth nothing, so weigh it inside the regime comparison rather than assuming it tips the balance.
• The yearly-versus-aggregate ceiling is unsettled. Keep every year's interest certificate and take advice before a large multi-year claim.†

Should you claim it, and how do you get the most from it?

Claim it whenever you are on the old regime and still paying interest on a qualifying EV loan; there is no downside. The live decisions are three: whether the deduction helps tip you onto the old regime at all, whether the business-expense route beats it, and whether to prepay.

Put a number on the regime question. At the 30% slab a full ₹1,50,000 of interest is worth ₹46,800 of tax off the old-regime bill, cess included; at the 20% slab, ₹31,200. That is real money, but on its own it rarely flips the regime choice, because the new regime starts from lower slabs and a bigger rebate. Section 132 tends to matter only stacked with a home-loan interest claim (Section 22), the ₹1,50,000 Section 123 basket and health premiums (Section 126). Run both regimes before deciding; never assume the deduction wins it.

If the vehicle earns its keep, compare the two routes with the real figures. On ₹2,40,000 of yearly interest at the 30% slab, Section 132 saves ₹46,800 while the uncapped business-expense route saves ₹74,880, a gap of ₹28,080 in the business route's favour, and it works under either regime. For a salaried person with a personal car that route is closed, and Section 132's ₹1,50,000 is the ceiling.

On timing, the loan window has already fixed your eligibility, so the only lever left is prepayment. Clearing an EV loan early saves the interest itself, but it also ends the deduction, so a taxpayer on the yearly reading who is comfortably inside the old regime gives up ₹46,800 a year of tax saving by paying off a loan that still throws off ₹1,50,000 of interest. Weigh the interest rate you would save against the tax you would forgo before prepaying.

Worked examples

Section 132 FAQs