Sitharaman electrifies EV market with tax breaks on EVs

Finance minister Nirmala Sitharaman in her budget speech has proposed I-T deduction of up to Rs 1.5 lakh for interest paid on loans for buying EVs.

Budget 2019: What's in it for the auto sector
Electric vehicles are set to become much more affordable, with the government planning to cut tax on such vehicles and extend income-tax rebates to people taking loans to buy battery-powered bikes, scooters, cars and three-wheelers. Finance minister Nirmala Sitharaman in her budget speech has proposed I-T deduction of up to Rs 1.5 lakh for interest paid on loans for buying EVs.

According to an ETIG analysis, on a loan of Rs 10 lakh for an EV with a five-year tenure, the buyer will be paying an interest of Rs 1.2 lakh a year at prevailing rates. This will lead to income-tax savings of up to Rs 36,000 in the first year for an individual. The government has also urged the GST Council to reduce the tax rate on EVs to 5% from 12%, Sitharaman said.

“Private buyers who were earlier not considered for a subsidy through Phase 2 of Faster Adoption and Manufacturing of Electric Vehicles (FAMEII) will now have a reason to seriously consider an EV, given the tax exemption of up to Rs 1.5 lakh,” said Shailesh Chandra, president (electric mobility business and corporate strategy) at Tata Motors.


Tarun Mehta, cofounder at EV maker Ather Energy, said I-T rebate is a major boost for endconsumers to purchase EVs. “It addresses the concern of the upfront cost of purchasing.”

Supporting infrastructure, such as charging stations, is another key for the success of EVs. While the budget did not elaborate on plans for setting up charging stations, the government had in March 2019 earmarked around Rs 1,000 crore for setting up charging infrastructure under the second phase of the FAME India Initiative.

The finance minister on Friday also announced incentive schemes for mega manufacturing plants of solar photovoltaic cells, lithium storage batteries, and solar electric charging infrastructure. TVS Motor Company chairman Venu Srinivasan said that the budget is a step in the right direction.
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“We have always maintained that EVs should be incentivised and not mandated through a ban on certain technologies.”

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