The Indian government is taking concrete measures to boost sales of electric cars! The Narendra Modi government’s first financial budget announcement brought the good news of many new measures to promote the sale of electric cars. Not only will there be benefits that directly affect buyers of electric vehicles, but the government will also support the manufacturing of lithium-ion batteries for electric mobility.
Finance Minister Nirmala Sitharaman was the one who delivered the budget speech at the Indian Parliament announcing that her government will now allow a tax deduction on loan taken by citizens to purchase electric cars. The limit to the tax deduction has been set at Rs 1,50,000 (~ US$2,200.) That value is without any relation to the class or cost of the electric car purchased. A buyer would be able to reap tax benefits of Rs 2,50,000 (~US$3,650) over the entire tenure of the loan through this newly announced incentive, according to the government.
Secondly, the government has proposed to reduce the Goods & Services Tax (GST) on electric vehicles from 12% to 5%, the lowest tax slab. The GST Council, a committee of finance ministers of all the states of India, will make the final decision on this tax reduction.
The government had already set in place the FAME-II scheme with incentives worth Rs 10,000 crore (US$1.5 billion) available to EV buyers in the commercial segment, but there was little to no incentives available for buyers in the private segment. This tax deduction on purchases of electric cars was the missing piece of the puzzle as it is a major incentive for the private consumer segment.
Now private consumers and commercial buyers can get tax breaks on the purchase of electric vehicles. Commercial buyers are eligible (under the FAME-II scheme) for direct financial subsidies of up to Rs 187,000 (~ US$2,730) on purchase of select electric car models and up to Rs 61,00,000 (~ US$81,300) on purchase of a Volvo hybrid electric bus. In addition, a wide range of incentives is available for two and three-wheel electric vehicles that dominate the Indian electric mobility market.
Thirdly, Sitharaman also proposed exempting certain parts of electric vehicles – such as the e-drive assembly, on-board charger, e-compressor and charging devices – from customs duty. All to further promote the use of electric vehicles in the country.
These new incentives proposed would be implemented as soon as Parliament approves it, and the President of India signs it.
