Electric Vehicle Tax Benefit – How to Save Tax on Electric Vehicles (EVs) in India

Electric vehicles don’t pollute the environment as they don’t emit air pollutants and gases.  Hence, they are termed as the future of the auto sector. Over the years, this industry is slowly and gradually getting popular among the masses in India. People are becoming serious about the use of these environment safe vehicles and have started adopting the ‘Go Green’ strategy.

Electric vehicles also present another advantage in the form of saving on petrol prices. With the increasing prices of petrol, it is becoming a huge burden on common people to drive these vehicles. Hence, they are opting for electric ones.

In addition, another important aspect of these vehicles is the income tax benefits on electric vehicles. Thus, along with their cost-effectiveness, electric vehicles are great in terms of tax benefits also. Let’s find out the various tax advantages allowed on electric vehicles.

What Do You Mean by Electric vehicle??

Electric vehicle is a motor vehicle that runs with the help of an electric motor. Electric vehicles make use of a traction battery for the traction energy supply that is required for the running of the vehicle. These vehicles are equipped with a braking system in the form of electric regenerative. While applying brakes, the regenerative braking system converts kinetic energy to electrical energy.

Electric Vehicles Tax Benefits in India

The government offered many lucrative electric vehicle tax benefits in India over the years to encourage more and more people to use electric vehicles. Section 80 EEB was introduced recently to allow tax deduction on electric vehicle’s loan interest. So, if a person buys an electric car with a vehicle loan, he/she can save tax on the interest paid for the loan. This section was introduced to inspire people towards using eco-friendly vehicles for transportation.

Conditions for Claiming Deductions under Section 80 EEB

Below are the conditions under which one can claim deductions under electric vehicle loan tax benefits under section 80 EEB:

• Tax Deduction is allowed only when the loan is availed to finance the electric vehicle
• Tax benefit is allowed only on the interest of the loan availed for procuring the EV
• The vehicle owner should avail the loan from a recognized bank or NBFC or Non-Banking Financial Companies/Institutions
• Deduction offered is up to INR 1.5 lakh on which the individual can avail tax benefit .

Benefits of Electric Vehicle: Electric Vehicle Tax Benefit, India

Here are some of the benefits received on electric vehicles:

1. GST Rate – To benefit the buyer of an EV, the government has lowered the GST rate on EV to 5% from 12%
2. Benefits of Green Tax – Green tax is levied on EV while renewing the RC of the vehicle after 15 years. However, the government has exempted EV buyers from this charge
3. Low Maintenance – As compared to the regular diesel/petrol vehicles, EVs allow low maintenance cost
4. PUC Certificate not required – Pollution Under Control or PUC certificate which are required in case of diesel/petrol cars are not required in case of EVs. PUC specifies that a particular motor vehicle is not releasing any hazardous gases in the case of vehicles running on petrol or diesel. However, since EVs are battery operated, they do not require such certification.
5. Electric car insurance – There are many insurance providers who offer coverage for EV to insure the car against third-party damages as well as own car damages. Further, like in the case of standard vehicles, buying third-party insurance is legally mandatory for EVs too.