Here’s a look at government incentives for EVs, which are currently only available for personal cars
Electric vehicles, or EVs, are not only better for the environment, they are also more efficient than traditional gasoline-powered vehicles. Furthermore, rising petrol and other fuel prices have contributed to many customers’ desire to switch to electric vehicles. EVs are not only cost-effective, they also have tax advantages in India.
Cars for personal use are considered luxury products under Indian tax laws, therefore salaried professionals do not receive any tax benefits on auto loans. In order to encourage the use of electric vehicles in India, the government created a new section that exempts EV owners from paying taxes.
In India, there is no shortage of electric vehicle models, and with increased sales, various manufacturers are planning to introduce new models in the coming year.
Central Government Incentives:
The central government announced a range of incentives for electric vehicles in the 2019-2020 Union Budget. These include an income tax deduction of up to Rs 1.5 lakh on the interest paid on loans taken to buy EVs and an additional income tax deduction of Rs 1.5 lakh on the purchase of EVs, under section 80EEB, over and above the existing deduction of Rs 1.5 lakh under section 80EEA. The additional deduction is applicable for FY 2020-21 only.
Both these deductions are subject to the condition that the purchase is made in any year between April 1, 2019 and March 31, 2023.
Last year, Finance Minister Nirmala Sitharaman also announced an excise duty exemption on EV chargers till March 31, 2023. She further said that the government will install 2,600 charging stations across 62 cities by March 31, 2022 and added that there would be a special scheme for fleet operators who want to switch to electric vehicles (EVs).
What are the Government Incentives?
There are two main types of incentives available to EV buyers – direct and indirect. Direct incentives include income tax benefits and reduced registration costs. Indirect incentives are things like discounts on tolls and free parking.
Cash Discounts: Some states offer cash discounts for buying electric vehicles. The most notable state is Andhra Pradesh which offers a discount of up to Rs 5 Lakh for a four-wheeler and Rs 1 Lakh for a two-wheeler. These discounts are offered by a private agency called APEVFED, which is funded by the state government. Other states such as Kerala and Maharashtra also offer cash discounts but they’re much smaller.
Income Tax Benefits: This is available at both the central and state level, but not everyone gets it. If you’ve bought an electric vehicle after 31st March 2019, you may be eligible for income tax.
Eligibility Criteria: Individuals are the only ones who can take advantage of this deduction. No other taxpayer is eligible for this deduction. As a result, you cannot claim any advantage under this provision if you are a HUF, AOP, Partnership firm, company, or any other type of taxpayer.
Following are the conditions that apply to Section 80EEB
- This exemption is only available once to each person. This means that only someone who has never owned an electric vehicle before is eligible for Section 80EEB loan tax relief.
- This exemption is limited for persons who are financing an electric vehicle. The EV should be financed by a loan from a financial institution or a non-banking financial company (NBFC).
- Payoffs of any EV loans accepted between April 1, 2019 and March 31, 2023 are eligible for tax savings under the section.
- From FY 2020-2021 onwards, tax incentives under Section 80EEB are available.
People who choose to acquire an EV on loan will be eligible for a tax deduction of Rs 1.5 lakh on interest paid on the loan amount under Section 80EEB. For salaried professionals, this tax savings makes buying an EV as their next vehicle an appealing prospect.
