Over the last few years, the government has offered electric vehicles tax benefits and various incentives to encourage the adoption of electric vehicles (EVs). Following are some tax benefits provided by the government to increase the adoption of electric vehicles.
Income Tax benefits
Any individual buying electric vehicles is eligible for income tax benefits under Section 80EEB Income Tax Act. Under this Section, you can claim a deduction of rupees 150000 (One lakh fifty thousand rupees) for the interest paid on the loan specifically taken for buying electric vehicles with certain conditions which are as follows.
- The loan must be taken from a financial institution or a non-bank financial company specifically for buying an electric vehicle.
- Loan must be sanctioned between 1st April 2019 and 31st March 2023
- The electric vehicle should meet the definition provided in the Act. That is the vehicles must be powered only by an electric motor with regenerative braking systems.
Goods and Services Tax (GST)
The government has added another tax benefit by reducing GST rate on electric vehicles compared to conventional internal combustion engine vehicles. This makes electric vehicles more affordable to the consumers.
The central government has reduced the Goods and Services Tax on electric vehicles from 12%tpo to 5%. Which is more beneficial to electric vehicle buyers.
State-Specific Incentives
Some states in India offer additional incentives for electric vehicle buyers. These incentives for electric vehicles include subsidies, reduced road tax, or other benefits. States where pollution needs to be controlled are offering more benefits.
Faster Adoption and Manufacturing of Hybrid and Electric Vehicles Phase II (FAME-II)
Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) is an initiative by the government to encourage the adoption of electric and hybrid electric vehicles. It provides financial subsidies/incentives to the consumer and manufacturer to make EVs more attractive and affordable.
The central government’s FAME-II subsidy scheme for vehicles is ending in March 2024 and talks of extending the current scheme by one year until a new plan is in place are underway. The existing FAME-II scheme covers two-wheelers, three-wheelers, and four-wheelers, with a budgetary outlay of 10000 crore. Additionally, the FAME-III schemes, estimated to require Rs 30,000 Crore in the next 5 years have been submitted.
There are some model that comes under the subsidy and are available government’s official website.
Custom Duty Exemptions
In some cases, customs duties on certain components used in the manufacturing of electric vehicles have been exempted to promote the growth of the electric vehicles industry.
Green Tax
When a vehicle owner registers their car after 15 years, a green tax is levied. The green tax is removed when you buy electric vehicles.