Govt proposes additional income tax deduction of Rs 1.5 lakh on EV loanstext_fields
New Delhi: The government on Friday proposed to provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles as part of efforts to accelerate adoption of eco-friendly mobility solutions.
While presenting the Budget for 2019-20, Finance Minister Nirmala Sitharaman said the initiative would lead to a benefit of around Rs 2.5 lakh for a customer during the entire duration of the loan.
"Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles," she said.
In order to make EVs affordable, the government has already moved the GST council to lower the tax rate on such vehicles from 12 to 5 per cent, the finance minister said.
"Also to make electric vehicles affordable to consumers our government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on the loans taken to purchase EVs," Sitharaman said.
Her announcement comes close on the heels of Niti Aayog proposing to migrate to full electric vehicles for two-wheelers of engine capacity of up ot 150 cc and three-wheelers by 2023 and 2025 respectively.
The Finance Minister further announced that customs duty is being exempted on certain parts of EVs to further incentivise e-mobility in the country.
Sitharaman said that already Rs 10,000 crore has been approved on April 1, 2019, to encourage faster adoption of EVs in the country under the FAME II scheme, which aims to encourage faster adoption of EVs by right incentives and charging infrastructure.
"Only advanced battery and registered e-vehicles will be incentivised under the scheme with greater emphasise on providing affordable and environment friendly public transportation options for the common man," Sitharaman said.
Society of Manufacturers of Electric Vehicles Director General Sohinder Gill said the announcements on EVs in the union budget brings cheers to both consumers as well as e-vehicle manufacturers.
"To make India as an EV manufacturing hub, decision on incentivising EV manufacturing by extending benefits under Section 35AD(1) is a move in the right direction. It will help in the creation of a local manufacturing base and encourage component manufacturers to invest in the sector," he added.
Additionally, bringing down custom duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale-up the business, he added. Ather Energy Co-founder and CEO Tarun Mehta said the additional income tax reduction is a major boost for end-consumers to purchase EVs.
Similarly, Okinawa Autotech Founder and Managing Director Jeetender Sharma said positive moves like reduction of GST to 5 per cent from 12 per cent on EVs and tax benefits up to Rs 1.5 lakh on loan will make such vehicle affordable for consumers.
Lohia auto Industries CEO Ayush Lohia said the government's push in the sector would help attract investment for manufacturers and ensure clean energy over time.
"This decision will represent the next generation in sustainable mobility & make them an attractive alternative to consumers," he added.