Govt has given income tax sop on electric vehicles; here’s all you need to know

The automotive industry of India is progressing towards an electric economy at a steady pace and while presenting Budget 2019, Finance Minister Nirmala Sitharaman on 5th July, 2019 proposed a slew of measures meant to promote the adoption of electric vehicles (EVs) in the country.

“Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles,” Sitharaman said.

Here are the key steps Budget 2019 listed to promote EVs:

1) Income tax sop: The government has proposed to provide additional income tax deduction of Rs 1.5 lakh on the interest paid for loans taken to purchase electric vehicles. While presenting the Budget, Finance Minister 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.

2) Cut in GST rate for EVs: Sitharaman also said that in order to make EVs affordable, the government has already moved the Goods and Services Tax (GST) council to lower the tax rate on such vehicles from 12 to 5 per cent.

3) Duty exemption: 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 also said that Rs 10,000 crore has already been approved on April 1, 2019, to encourage faster adoption of EVs under the FAME II scheme. “Only advanced battery and registered e-vehicles will be incentivised under the scheme with greater emphasis on providing affordable and environment friendly public transportation options for the common man,” Sitharaman added.

EV industry hails Budget 2019

Society of Manufacturers of Electric Vehicles Director General Sohinder Gill said that the announcements on EVs in the Union Budget would bring cheer to both consumers and 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.

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Additionally, bringing down customs 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 vehicles 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 and make them an attractive alternative to consumers,” he added.


– Mahindra e-Verito (Rs 10.9 lakhs – Rs 13.5 lakhs)

– Mahindra e2o (Rs 7.48 lakh- Rs 8.24 lakh)

– Tata Tigor EV 2019 (Rs 9.99 lakh – Rs 10.09 lakh)

– Hyundai Kona (Rs 25.30 lakh introductory price)


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