Is there any subsidy on electric car?

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Is there any subsidy on electric car?

Electric vehicles, also known as EVs, aren’t only more sustainable, but they also run more efficiently than gasoline-powered cars that are traditional. Additionally, the rise in petrol prices and other prices for fuel are a major factor in many customers wanting to make the switch to electric cars. They are not just economical and efficient, but they also provide the benefit of tax benefits for India. Cars used for personal use are considered to be luxurious products in Indian tax laws, which is why professionals who are salaried do not get any tax advantages on auto loans. To encourage the adoption of electric vehicles in India the government has created an additional section that excludes owners of electric vehicles from taxation.

In India there’s no shortage of electric vehicles and, with the increase in sales many companies are planning to launch new models during the coming year.

Tax deductions on loans for EVs

In the event of paying on an EV loan the tax exemption that can be as high as Rs. 150,000 is granted under the section 80EEB. This tax break is available to both two-wheeler and four-wheeler electric vehicle purchase.

Eligibility Criteria for subsidy on electric car

Only individuals who are eligible to take advantage of this deduction. There is no other tax payer qualified to take advantage of this deduction. Therefore, you are not able to claim any benefit under this section when you are an HUF, AOP partnership firm, company or another type of taxpayer.

The following is the list of conditions which govern Section 80EEB.

  • The exemption can only be claimed for each individual. This means that only a person who has not owned an electric car prior to this is qualified to receive Section 80EEB tax relief on loans.
  • This exemption is only available to those who finance vehicles that are electric. The electric vehicle must be funded with a loan provided by financial institution or non-banking financial corporation (NBFC).
  • The repayments of any E-V loans that are accepted between April 1st 2019, and March 31, 2023 can be qualified for tax deductions according to the Section.
  • HTML0 Beginning in FY 2020-2021 Tax incentive programs under the Section 80EEB will be available.
  • Anyone who decides to buy an EV by loans will be eligible for an income tax deduction of 1.5 lakh for the interest that is paid on the loan under Section 80EEB. For professionals who are salaried this tax benefit makes purchasing an electric vehicle as their next car attractive.
    How India performs against other countries in terms of the tax incentives for electric vehicles
    To fulfill its obligations in the Paris Climate Accords, the Centre has initiated initiatives to encourage the use of electric vehicles . It also has encouraged state governments to promote buying electric automobiles. In August The Ministry of Road Transport and Highways (MoRTH) announced that electric vehicles would not be subject to “fees to the point of the issuance or renewal of registration certificates. ..

In the past the government had reduced the GST element on electric vehicle to 5%.Four-wheel electric vehicles are eligible for the maximum amount of 1.5 thousand as part of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) program, and two-wheelers may receive an amount of 40% of the purchase cost.

States also offer incentives and financial aid for buying electric automobiles. These subsidies are distinct from the ones that are granted under FAME-II.

For electric vehicles as well as SUVs Maharashtra gives a minimum subsidy amount of 2.5 lakh. However, Delhi, Gujarat, Assam, Bihar, and West Bengal offer subsidies up to the equivalent of 1.5 lakh. A subsidy of 1 lakh is also offered in Odisha and an amount of Rs 60,000 is offered in Meghalaya. Subsidies of varying between Rs 5,000 and thirty thousand will be available to Delhi, Maharashtra, Meghalaya, Gujarat, Assam, Bihar, West Bengal, Rajasthan and Odisha to purchase electric two-wheelers.

The majority of these states allow electric vehicle owners to avoid having to pay road tax in accordance with their EV policies. Rajasthan, Andhra Pradesh, Karnataka, Madhya Pradesh, Telangana, Tamil Nadu, Uttarakhand, Punjab, and Uttar Pradesh all exempt EVs from having to pay road tax completely but they do not provide any indirect or direct incentives.

Deductions & Calculations 

To understand the amount of money and deductions Let’s look at a basic electric vehicle model. For the Mahindra E2o Plus P4 model, the retail price for Mumbai is approximately Rs7.46 lakh, as per cardekho.com. If you get an entire loan amount, with an annual rate of 10.25 percent and five years the EMI will be about $15,947, of which approximately Rs9,500 will be paid towards the principal while an additional Rs6,374 goes towards interest.