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India Budget 2019: New incentives for electric vehicles, tax benefits for buyers

India Budget 2019: The government will provide additional income tax deduction of Rs 1.5 lakh rupees on the interest paid for loan taken to buy an electric vehicle.

By: Tech Desk | Updated: July 6, 2019 3:09:32 pm
electric vehicle budget 2019, electric vehicle, electric vehicle budget 2019 india, tax rebate electric car, tax rebate electric car 2019, tax rebate, budget 2019, budget, interest on loan, interest on vehicle loan, budget 2019 electric vehicles, union budget 2019, union budget 2019 electric vehicles Budget 2019: The government of India has announced special tax benefits for those who purchase electric vehicles. In this photo, Toyota’s concept electric vehicles are seen. Image used for representational purposes. (Image source Reuters)

The government has announced tax benefits in order to make the purchase of Electrical Vehicles or e-vehicles easier for potential customers. In the budget speech, Finance Minister Nirmala Sitharaman also reminded that the government has already asked the GST council to lower the GST rate on electric vehicles (EV) to 5 per cent from the existing slab of 12 per cent.

Coming to the tax benefits for buyers, the government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid for a loan taken to buy an e-vehicle. In total, the benefits will come to Rs 2.5 lakhs for those who purchase an electric vehicle on road. This means that for those taking a loan to purchase an electric vehicle stand to get more tax benefits with the new budget.

The government also allocated Rs 10,000 crore for faster adoption of electric vehicle. It said that this move will help attract investment for manufacturing of E-vehicles in  India and ensure clean energy being used over time.

“Only advanced battery and registered e-vehicles will be incentivised under the Scheme with greater emphasis on providing affordable and environment friendly public transportation options for the common man,” she said.

Read more: Budget 2019 Explained: Housing finance sector could see shakeout under RBI 

According to Pranavant, Partner, Deloitte India, “While these are good initiatives by the government to give push to adoption of electric mobility in the country, there is still a gap in the price premium for EVs, which can be gradually reduced through technology advancements and localisation in the manufacturing.”

“Clearly the government wants to incentivise use of e-vehicles, the recent reduction in GST rates from 12%to 5%, customs duty exemption one vehicles, etc when other vehicles attract much higher rates of GST and customs duty is a thrust to encourage a switch to these vehicles,” Saloni Roy, senior director, Deloitte India said.

“Government’s preference to move towards promoting Electric Vehicle (EV) is very clear from the number of incentives provided in the budget – Rs 10,000 Cr for FAME-II, cut in excise duty to 5% and tax deduction of Rs 2.5 lakhs for individuals buying EVs etc. Although this may not result in any meaningful shift in market share of EVs even in the medium term, still Oil and gas companies need to do scenario planning to calibrate their future investments in refineries and gas sector,” Debasish Mishra, Leader Energy Resources and Industrials at Deloitte Touche Tohmatsu India said.  

“Income tax deduction on loans for EV purchase is an extremely welcome move by the new Finance Ministry. EVs are pricier than usual vehicles as initial cost, hence this will boost adoption”, said Akshay Singhal, Founder, Log 9 materials, which works in the Nanotechnology Domain. He adds that while relief from angel tax is also a big thumbs up and relief for startups, better structuring is required for deployment of Fund of Funds to ensure benefit to high technology intensive startups which fall in the category of high risk, high reward.

“This is important for development indigenous core technologies like battery manufacturing, fuel cell manufacturing, etc,” he said.

“The Government’s focus on Electric Mobility and EVs in the Budget 2019 is inspiring. Lower GST rate, interest subvention for EV loans and the commitment of Rs 10,000 cr towards FAME 2 are encouraging. This further reinforces Ola’s mission to build Electric Mobility for India and the world and contribute toward making our nation, the global hub for innovation in this space,” Bhavish Aggarwal, Co-founder & CEO of Ola said.

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