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


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Updated on Jan 07, 2024

For keeping the environment clean and pollution free, people have now started using Electric Vehicles in India widely. Let us understand in this post how you can save tax on Electric Vehicles (EVs).  

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.

Read More: Best Electric (EV) Sedan and SUV Cars in India

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 .

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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.

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To Conclude

Electric vehicles are indeed the future of the auto industry and people are gradually adapting to these vehicles with time. With the skyrocketing costs of petrol and diesel, it has become necessary to switch to EVs.

In addition, the government initiative on tax deductions have made electric vehicles more affordable now as compared to earlier. With electric vehicle insurance you can make sure to avail extra protection for your EV.

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FAQs: How to Save Tax on Electric Vehicles (EVs)?

How can you save tax on electric cars?

Section 80 EEB of Income Tax Act of India allows deductions on the interest paid on a loan availed to purchase an electric vehicle.

What are the most important criteria when buying an EV for daily use?

Here are the things to keep in mind while buying an Electric Vehicle: 
Consider Your Budget
Consider the incentives offered under your electric vehicle 
Check the charging options
Maintenance cost of the vehicle
Battery performance 
Mileage etc.

Do you save or lose money on owning an EV in India?

EVs are said to provide low maintenance cost as the servicing and upkeep charges are less in EVs as compared to regular vehicles. EVs have fewer moving parts and they do not have too many filters or fluids, so they are regarded as less expensive in terms of yearly maintenance as compared to petrol/diesel cars. 

Do you pay less tax on electric cars?

Since the GST or Goods and Services Tax on the sale of electric vehicles is reduced to 5% from 12%, it can be said that one pays less on electric vehicles.

Is there any tax benefit on electric vehicles in India?

Yes, you can get tax benefits on electric vehicles in India offered by the government under section 80 EEB and others. Also, the GST rate on EVs has been lowered to 5% from 12% that was charged earlier.   

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Jan 07, 2024
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PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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