Although electric vehicles are expensive to buy, purchasing them can make you claim tax benefits not just from GST but income tax as well.
Electric vehicle sales are picking up in the Indian market. With new products dropping in with more practical range claims, buyers are adopting electric vehicles over their ICE counterparts. The pandemic too boosted the demand for individual mobility solutions, while the increasing cost of petrol and diesel is making buyers shift to cheaper fuel options. Here’s where the adoption of electric vehicles makes its way to Indian buyers. Although EVs are cheaper to own and run, the initial cost is high. Interestingly, government initiatives are helpful in reducing the initial cost of electric vehicles with FAME-II subsidies. Nevertheless, there are high tax benefits, which can also be availed on purchasing an electric vehicle. So, read on to know about them.
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GST on electric vehicles
Well, purchasing an electric vehicle can help you save on income tax under 80EEB if an electric vehicle is purchased against an auto loan. Moreover, the GST levied on an electric vehicle is much lower than on an ICE vehicle. Only 5 per cent of the vehicle’s cost will be charged as GST against the purchase.
Tax benefits – 80EEB
In case, an electric vehicle is bought via an auto loan, then buyers are eligible for deductions of up to Rs 1.5 lakh annually, against the interest paid for the loan in the financial year. Interestingly, this rule is applicable for both 2-wheelers and 4-wheelers. Nothing of this sort is applicable to purchasing a conventional ICE vehicle, thus making the whole EV purchasing experience further lucrative a deal. Tax benefits under this section can be availed only if the amount was loaned by registered banks or NBFC. Moreover, it can be claimed against the payoff made between April 2019 and March 2023. The government is only offering this tax relief to individual buyers and not to businesses.
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Alongside, various states are extending benefits under their EV policies to consumers and producers, and the list includes the likes of Delhi, Gujarat, Maharashtra, Andhra Pradesh, Karnataka, Tamil Nadu, Meghalaya, and Telangana. The model for promoting EV adoption in states like Delhi, Gujarat, and Maharastra is more focused on providing upfront discounts and rebates to consumers. Karnataka, Andhra Pradesh, Telangana and more, on the other hand, are promoting component and product manufacturing.
