Tax benefits of buying an electric vehicle

17 February, 2023

Whether it is their eco-friendly nature or the long-term cost-effectiveness they offer, electric vehicles (EVs) have become very popular in recent times. The technology used in developing EVs is outstanding, from zero emissions to noiseless operation to the instant torque that translates to better acceleration.

Apart from the many apparent benefits, EVs are eligible for government incentives in the form of tax rebates and deductions. Let's learn more about India's growing demand for EVs and their tax-saving benefits.

The rising demand for EVs

The Indian market has welcomed EVs with open arms for a few years. Reports suggest that the market for these vehicles is likely to grow by 47.09% between 2022 and 2027. A significant contributor to this growth is the need for alternative energy sources. With floods, forest fires, climate change and their direct impact on the economy, everyday lives, and health, people are turning to greener modes of transport.

EVs solve several issues like exhaust emissions, noise pollution, etc. They also offer numerous benefits, including smoother drives, lower maintenance, and better savings.

Tax incentives for EV buyers

Tax benefits are one particular advantage proving to be a great incentive to buy an EV. In 2019, the government announced tax benefits under the new Section 80EEB. The section is applicable to individual taxpayers and offers a tax deduction of up to ₹ 1.5 lakhs on the interest component of a car loan taken to buy an EV.

An EV Loan can be used to purchase an electric car or bike for personal or professional use. However, the vehicle should be registered in the name of the owner or business. You can claim a tax deduction for the entire duration of the loan (i.e., until it is fully repaid). Section 80EEB applies to both two- and four-wheelers.

Terms and conditions under Section 80EEB:

Taxpayers need to keep the following things in mind before availing of benefits under Section 80EEB:

• The loan should have been taken between 1 April 2019 and 31 March 2023 and only for the purchase of an electric vehicle.

• The loan should be taken from a bank or non-banking financial company (NBFC), as mentioned in Section 51 of the Banking Regulation Act, 1949.

• Section 80EEB is applicable only to individual taxpayers. It does not include Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Limited Liability Partnerships (LLPs), firms, or companies.
  
  

Other monetary benefits of electric cars and bikes

Here are some other financial benefits of buying an EV:

• The Union Ministry of Road Transport and Highways (MoRTH) has exempted all battery-operated vehicles from paying for the issue and renewal charges of a registration certificate.

• Several state governments have offered incentives for EVs. For instance, the Tamil Nadu government has extended motor vehicle tax exemption by 100% for EVs registered in the state. All EVs registered between 1 January 2023 and 31 December 2025 are eligible.

• The Delhi government also announced in 2020 that two and four-wheeler EVs would be exempt from paying road tax under the Delhi Electric Vehicles Policy.

• The central government charges a relatively low Goods and Services Tax (GST) of 5% (previously 12%) on electric vehicles and 18% on lithium-ion batteries.

• There is a 'green tax' charge to discourage people from using older vehicles that contribute to pollution. However, some vehicles that run on electricity, hydrogen fuel cells, or that are powered by CNG, LPG, LNG, etc., are exempt from this tax.
  
  

Conclusion

EVs can benefit individuals as well as the entire planet in many ways. This is a crucial reason that governments worldwide are encouraging people to move towards electric vehicles.

Fortunately, this is becoming easier as even banks like HDFC Bank now offer specialised products that can help reduce the cost of buying an EV. The Zip-Drive Instant New EV loan, for example, can give you financing worth up to ₹ 10 crores, flexible repayment tenures and cost-effective settlement options.

You can enjoy zero paperwork and a completely online process, anytime and anywhere. All you need to do is log into your NetBanking account and get the EV Loan process started.

With several brands introducing EV variants across price brackets and designs, and many projects in the pipeline, you can find an EV that suits your preference. As this number grows, so will the availability of infrastructure, like electric vehicle charging stations, bringing significant environmental and economic benefits. So, make a wise choice today and opt for a more eco-friendly mode of transport.

Did you know that now is a good time to purchase an EV Car? Click here to read more!

So, what are you waiting for? Apply for your Car Loan today!

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit at sole discretion of HDFC Bank Ltd. Other charges and taxes as applicable. The offer is unconditionally cancelable without prior notice. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.