The increasing oil demand has set the cost of fuel on upward momentum in the international market. Thus, every country is facing the problem of rising fuel prices, thereby resulting in a rise in the cost of every commodity sold in the country. To combat this, electric vehicles are a smart alternative.
Growth potential for electric vehicles
There has been a growing demand for electric vehicles (EVs) across the globe. Automobile manufacturers are driving innovation with newer technologies that find a way to combat the soaring fuel prices with sustainable alternatives like battery technology. India is no exception to this. According to a report by Mordor Intelligence, the Indian EV market is expected to grow at a CAGR of 47.09% during the period 2022-27. Considering the high growth potential, the government also aims to promote this by offering tax benefits.
Electric vehicles, be they cars or bikes, are not only a popular way to tackle the soaring fuel costs, but also a sustainable way to preserve the environment.
These vehicles have zero emissions in comparison to a traditional internal combustion engine or ICE. Thus, they tend to be more cost-effective over their entire life. Another advantage is that buyers of electric vehicles are incentivised by way of subsidies and tax benefits under the FAME (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India) Scheme under the electric vehicle policy in India.
Insurance for electric vehicles
Despite being an electric vehicle, a bike/car insurance cover is mandatory. Hence, you should not skip buying one. Based on the battery capacity of your vehicle, the insurance regulator, the Insurance Regulatory and Development Authority of India (IRDAI) has specified third-party bike/car insurance prices. You can visit the official website of IRDAI for further details. *
Tax benefits for electric vehicles
Cars in India are, generally, assumed to be a luxury purchase. Thus, there may be high tax implications. But the same is not the case for electric vehicles. The tax laws allow for a deduction of the interest paid on the loan amount when buying an EV. Let’s look at it in detail. Please note that tax benefit is subject to change in tax laws. *
Eligibility Criteria
Individual buyers who seek finance for buying an electric vehicle are eligible for a tax break for both, two-wheelers, and four-wheelers. Thus, no other taxpayers can avail of this benefit other than an individual buyer. *
Amount of Deduction
The maximum amount of deduction that an individual buyer can avail of is up to ₹ 1.5 lakhs under Section 80EEB of the Income Tax Act. *
Conditions for claiming deduction under section 80EEB
- The exemption is available only once to each person. This means that a person who has never owned an EV before can claim the deduction under this section.
- The deduction is limited only to individuals that are buying the vehicle using financing options from a banking institution or an NBFC.
- The repayment of loans availed during the period 1st April 2019 to 31st March 2023 is eligible for a deduction in the Income Tax returns.
- This relief can be availed from the financial period 2020-21.
* Standard T&C Apply
*Please note that tax benefit is subject to change in tax laws
As discussed above, an insurance policy is mandatory when buying an electric vehicle. While there are myriad options to choose from, you can make use of a bike/car insurance calculator. Further, the IRDAI offers a concession of 7.5% on the premium for electric hybrid cars in India.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
Comments are closed.