Tax benefits of buying an electric vehicle

Electric vehicles (EVs) have surged in popularity due to their eco-friendly features and long-term cost benefits. The advanced technology behind EVs includes zero emissions, silent operation, and instant torque, contributing to superior acceleration.

Beyond their numerous advantages, EVs also qualify for government incentives, including tax rebates and deductions. Let's explore the rising demand for EVs in India and how you can benefit from their tax-saving opportunities.

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. Floods, forest fires, and climate change have a direct impact on the economy, everyday lives, and health, so people are turning to greener modes of transport.

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

Tax benefits are one advantage that proves to be a great incentive to buy an EV. In 2019, the government announced tax benefits under the new Section 80EEB. The section applies 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 utilised to buy an electric car or bike for personal or business purposes. The vehicle must be registered in the name of the owner or the business to be eligible. You can claim a tax deduction on the interest paid throughout the loan term until it is fully repaid. Under Section 80EEB, this benefit applies to both two-wheelers and four-wheelers.

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 applies only to individual taxpayers. It does not include Hindu Undivided Families (HUFs), Associations of Persons (AOPs), Limited Liability Partnerships (LLPs), firms, or companies.

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 a registration certificate issue and renewal charges.
• 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 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 are powered by CNG, LPG, LNG, etc., are exempt from this tax.

EVs can benefit individuals and the entire planet in many ways. This is a crucial reason governments encourage people to move towards electric vehicles worldwide.

Fortunately, this is becoming easier as even banks like HDFC Bank now offer specialised products to help reduce the cost of an EV. For example, the Zip-Drive Instant New EV loan can give you financing worth up to ₹10 crore, 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 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 the 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.