Buying An EV in India: Tax, Incentives, Rebates

Switch to EVs in India has become a necessity as the nation aims toward its goal of carbon neutrality by the year 2070, as announced at CoP26, 2021. The recent upsurge in fuel prices has also smoothened the road for EV’s. And helping it along is a slew of incentives from the government to help you make the transition.

Traditionally, cars come under luxury products under Indian income tax laws. Thus, a regular salaried professional does not receive any tax benefits on auto loans. This gave a breather to electric vehicle industry as the government exploited this opportunity by adding a new section, 80EEB, that exempts EV owners from paying taxes. Back in August 2021, the Ministry of Road Transport and Highways (MoRTH) announced that EVs would be exempt from fees for issuing or renewing registration certificates. Perhaps the only thing keeping people away is the lack of choice, especially in the 4 wheeler segment. But even there, expect things to change quickly by 2023-24, as many new models hit the roads.

Fame II Programme

The government pushed direct incentives to sow the trend of buying EV in India. For a two-wheeler, for example, the 2019 Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) plan offers Rs 15,000 per kWh of battery capacity (up to 40% of the vehicle cost) for two-wheelers. Similarly, it offers a direct incentive of Rs 10,000 per kWh of battery capacity up to Rs 1.5 lakh for electric four-wheelers.

Tax Incentives in India

The government seems to have left no stone unturned to encourage people into buying environmentally-friendly electric vehicles. The Centre offers a low GST rate of 5% on all EVs, which is significantly lower than the tax burden gasoline and diesel car have to bear.

Furthermore, at the time of paying back the EV loan, the customer may get an exemption of up to Rs 1,50,000 under the recently added section, 80EEB. Both four-wheeler and two-wheeler electric vehicle purchases are eligible for the exemption.

Eligibility

Only individual taxpayers buying EV in India can take the advantage of this deduction. Any other types of taxpayers, such as HUF, AOP, Partnership firm, or company are ineligible. Further, the exemption is valid for just one buy per person. The EV loan financing must be by a financial institution or an NBFC.

Payoffs of any EV loans accepted between April 1, 2019, and March 31, 2023, are eligible for tax savings under the section. Tax incentives under Section 80EEB are available from FY 2020-21 onwards.

State Governments EV Subsidies

The EV subsidies and incentives are in addition to those offered by state governments. Many of the states have their own policies to further encourage their regional population to choose EVs as their new buy. Thus, based on the region one lives in India, the incentives may even go higher than what is nationally set.

Delhi

Delhi incentivises only the first 1,000 electric automobile registrations in the state. The national capital offers Rs 5,000 per kWh of battery capacity up to Rs 30,000 for two-wheelers. This is in addition to registration and road tax exemption. For four-wheelers, the Delhi government offers a subsidy of Rs 10,000 per kWh of battery capacity up to Rs 1.5 lakh, plus registration and road tax deductions.

Telangana

Telangana also gave an impressive push towards EV adoption by incentivising the first 2 lacs two-wheelers, five thousand four-wheelers, and the twenty thousand three-wheeler auto-rickshaws with a 100 per cent exemption on road tax and registration expenses.

The state has also covered battery charging facilities. The first five hundred battery charging and exchange stations will get a 25 per cent capital subsidy on charging equipment. It doesn’t end here. A public EV charging station will have a ten-year duty exemption on electricity tariffs while a private one with fast-charging battery equipment will be reimbursed up to 75 per cent of tariffs. This is in addition to the developmental funds and land resources the state has set aside for the EV adoption programs, such as establishing EV manufacturing plants.

Maharashtra

The western state of India, Maharashtra, is one of the frontrunners for EV adoption measures in India. The state waives the road tax and registration fees for all the electric vehicles in the state. Besides, the state also offers the first one lakh electric two-wheelers in the state a Rs 5,000 per kWh battery capacity incentive (with a ceiling of Rs 10,000).

The state also granted an early bird bonus of up to Rs 15,000 (with a 3-kWh battery) for an EV purchase before December 31, 2021. The scrappage incentive of Rs 7,000 is also available.

Gujarat

Gujarat offers to each of its first 1.1 lakh electric two-wheelers customers a subsidy of Rs 10,000 per kWh of battery capacity up to Rs 20,000. The state also provisioned a rebate of Rs 10,000 per kWh of battery capacity (up to Rs 1.5 lakh), to the first 10,000 auto buyers in the state. In addition, road tax and registration exemptions are also in place in the state.

Meghalaya

For the first 3,500 two-wheelers bought and registered in the state, the government is offering a subsidy of Rs 10,000 per kWh of battery capacity. The maximum price to avail incentive is Rs 1.5 lakhs for electric two-wheeler vehicles. Meanwhile, for the first 2,500 four-wheelers, the state is offering an incentive of Rs 4,000 per kWh of battery capacity. The maximum price is Rs 15 lakhs for electric four-wheeler vehicles. Also, both two and four-wheelers are exempted from road tax and registration.

Assam

The government of Assam will support the deployment of the first 200,000 EVs [100,000 two-wheelers, 75,000 three-wheelers and 25,000 four-wheelers) either under commercial use or individual use over the next five years. Furthermore, there is a waiver on road tax and registration of EVs for the next five years. The state also offers zero parking charges till 2026 for EV owners.

Odisha

Odisha has also announced a 100% exemption of motor vehicle tax and registration fees, applicable till 2025. Further, 100 per cent interest-free loans would be made available to State government employees for the purchase of electric vehicles.

Rajasthan

All EV two-wheelers sold and registered in the state between 1 April 2021 and 31 March 2022 qualify for SGST reimbursement. The incentives vary as per the battery capacity of the EV. Electric scooters and motorcycles with a battery capacity of up to 2 kWh are eligible for a subsidy of Rs 5,000. While the models with a battery capacity of 2 to 4 kWh will be eligible for a Rs 7,000 incentive. Interestingly, the policy does not cover electric cars and SUVs and steers clear of offering any large incentives to buyers of such vehicles. Hence, the one-time subsidy is only available to buyers of two and three-wheelers.

West Bengal, Andhra Pradesh, and Goa

The West Bengal government has waived road tax and registration fees. Goa has also announced registration fees and road tax waivers for electric two-wheelers.

Andhra Pradesh also offers full exemption from road tax and registration fees for electric vehicles.