Indian EV Market: Good Start, Better Future

How the Government is Incentivizing the EV Segment?

Prima facie, an EV may appear more expensive compared to the traditional internal combustion engine, and that is true. However, the government has offered a slew of incentives at a producer level and consumer level to boost the usage of EVs in India. While the upfront cost may still be relatively higher, the effective cost over the life of the vehicle is drastically lowered by these incentives. Here are some key incentives for EVs in India. 

a) The government subsidizes direct discount provided to the buyer of EVs on the cost of the electric vehicle. This is an upfront benefit. In addition, there are also fiscal incentives like lower GST at 5%, compared to 28% for cars with internal combustion engines.

b) An interest subvention scheme funded by the government allows EV buyers to acquire such vehicles on loan by paying a concessional rate of interest. This reduces the EMI and the effective cost of the EV over its life time.

c) State governments are also providing special waiver on Road Tax at the time of purchase of an EV. In addition, the one-time registration fee for new vehicles is also waived off. In fact, buyers surrendering old IC engine cars also get a better return price as scrapping incentive for de-registering old petrol and diesel vehicles.

d) Income tax benefit under Section 80EEB is a one-time benefit to individuals. It provides an exemption of up to Rs.1.50 lakhs for interest paid on EV loan. This will apply to four-wheeler and two-wheeler EVs. However, this is a one-time exemption only for first-time purchase by individuals and is not available to corporates.

Faster Adoption and Manufacturing of (Hybrid and) Electric vehicles (FAME) is India’s flagship scheme for promoting electric mobility. Currently the second phase (FAME II) is being implemented and is valid till April 2022 with a total budget of Rs.10,000 crore. Here are the incentives offered to the manufacturers of such EVs across categories.