Buying an EV in Karnataka? New tax laws could make your electric car costlier

New EV tax structure

The amendment introduces a tiered tax system for electric cars, jeeps, and omnibuses: under Rs 10 lakh: 5 per cent of the vehicle cost; Rs 10 lakh to Rs 25 lakh: 8 per cent of the vehicle cost; over Rs 25 lakh: remains at 10 per cent of the vehicle cost.

The government has also introduced slabs for older, already-registered EVs, ranging from 93 per cent of the lifetime tax for vehicles under two years old to 25 per cent for those over 15 years old. Owners can claim a 93 per cent refund if a registration is cancelled within a year.

The move comes despite Karnataka’s strong performance in the EV sector. According to Vahan dashboard data, Karnataka ranks second nationally with 60,800 EV four-wheelers sold in the last five years, trailing only Maharashtra (84,913).

EV enthusiasts have labelled the tax “retrograde”, saying that it penalises sustainable transport during a global fossil fuel crisis triggered by the West Asia conflict.

However, Transport Minister Ramalinga Reddy defended the bill in the legislature, stating the intent is effective tax collection rather than purely meeting targets. The motor vehicles tax target for the year 2026-27 is Rs 15,500 crore.

“We cannot exceed the target. It depends on the number of vehicles registered in the year. We may get an additional four to five per cent from penalties, etc. There is no intention for greater tax collection beyond the set goals,” Reddy said.

The department fell slightly short of its target of Rs 15,000 crore last year, collecting Rs 14,000 crore despite a 10 per cent year-on-year growth.

While EV taxes rose, the law provided relief for large passenger vehicles, discouraging owners from registering them in Union Territories like Puducherry to save money. Registration taxes for 12-seater vehicles, luxury buses, and sleeper buses have been slashed by Rs 1,000 across categories: from Rs 2,500 to Rs 1,500, from Rs 3,500 to Rs 2,500; and from Rs 4,000 to Rs 3,000, respectively.

EV surge in India

India saw a massive 83 per cent surge in EV passenger vehicle sales in the 2025-26 fiscal year, reaching nearly 2 lakh registrations, according to recent data from the Federation of Automotive Dealers Association.

Since 2023, Karnataka has seen a significant spike in demand, hitting record sales of 19,202 units in 2025. The momentum is continuing into 2026, with over 7,000 vehicles registered in the first three months alone. Delhi ranks third nationally, with 44,510 total sales over five years, finally crossing the 10,000-unit annual mark in 2025.