Section 132 of the Income-tax Act, 2025

Where this section sits

Section 132 is in Chapter VIII — Deductions to Be Made in Computing Total Income, which runs from section 122 to section 154.

← Section 131  ·  Section 133 →

What this section does

Sub-section (1) allows an assessee, being an individual, a deduction of interest payable on a loan taken by him from any financial institution for the purpose of purchase of an electric vehicle.

Sub-section (2) makes the deduction conditional on the loan having been sanctioned by the financial institution during the period beginning on the 1st April, 2019 and ending on the 31st March, 2023. Sub-section (3) caps the deduction at Rs. 150000 and allows it in computing the total income of the individual for the tax year beginning on the 1st April, 2019 and subsequent tax years. Sub-section (4) bars a second deduction: where interest is allowed under this section, no deduction for that interest is allowed under any other provision of the Act, for the same or any other tax year.

Sub-section (5) defines the two operative terms. An "electric vehicle" is a vehicle powered exclusively by an electric motor whose traction energy is supplied exclusively by a traction battery installed in the vehicle, and which has an electric regenerative braking system that during braking converts vehicle kinetic energy into electrical energy. A "financial institution" is 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.

Why it is there

The deduction is an incentive attached to a closed window of loan sanction rather than to a continuing policy: sub-section (2) fixes both ends of the sanction period, so the section rewards a purchase decision taken between April 2019 and March 2023 and nothing later. The definition in sub-section (5)(a) is drawn tightly around a fully battery-electric vehicle with regenerative braking, which keeps hybrids and part-electric drivetrains outside the concession.

Who it applies to

• An individual who has taken a loan to purchase an electric vehicle
• An individual whose loan was sanctioned between 1 April 2019 and 31 March 2023
• A financial institution, being a banking company under the Banking Regulation Act, 1949, a bank or banking institution referred to in section 51 of that Act, or a non-banking financial company

The figures, and what each one turns on

What this means in practice

The window in sub-section (2) is a sanction test, not a disbursement or purchase test, and it is closed — a loan sanctioned on or after 1 April 2023 gets nothing under this section however new the vehicle. But the deduction itself is not confined to those years: sub-section (3) allows it for the tax year beginning 1 April 2019 "and subsequent tax years", so interest on a loan sanctioned inside the window continues to qualify in later years while it remains payable, subject to the Rs. 150000 ceiling each year. The definition in sub-section (5)(a) requires exclusivity twice over — powered exclusively by an electric motor and traction energy supplied exclusively by an installed traction battery — and adds a regenerative braking requirement, so a plug-in hybrid does not qualify. Sub-section (4) closes off any attempt to route the same interest through another provision.

An example

An individual's loan for an electric car is sanctioned by a non-banking financial company in January 2023 and disbursed in May 2023. The loan is inside the window because sub-section (2) looks at the date of sanction. If the interest payable in a later tax year is Rs 1.9 lakh, sub-section (3) allows Rs 1.5 lakh and the balance Rs 40,000 is not deductible, and sub-section (4) prevents that balance being claimed under any other provision.

Where you meet this section

In the deduction schedule of an individual's return, supported by the lender's interest certificate and the loan sanction letter. The sanction date on that letter is the document an Assessing Officer looks at, because sub-section (2) turns entirely on it.

The words themselves

What people get wrong

• Testing the window by the date of purchase or disbursement. Sub-section (2) requires the loan to have been sanctioned between 1 April 2019 and 31 March 2023.
• Assuming the deduction is available only for tax years within that window. Sub-section (3) allows it for the tax year beginning 1 April 2019 and subsequent tax years.
• Claiming for a hybrid or part-electric vehicle. Sub-section (5)(a) requires exclusive electric motor power, traction energy supplied exclusively by an installed traction battery, and an electric regenerative braking system.
• Treating Rs. 150000 as a lifetime allowance or as an aggregate across vehicles. Sub-section (3) expresses it as a cap on the deduction under sub-section (1) in computing total income.
• Claiming the excess interest elsewhere. Sub-section (4) bars a deduction for the same interest under any other provision of the Act for the same or any other tax year.
• Assuming only banks qualify as lenders. Sub-section (5)(b) includes a non-banking financial company.

What this replaced

• 80EEB - Deduction in respect of purchase of electric vehicle

See the full 1961 to 2025 concordance.