Union Budget 2019: Income tax deduction on the loan interest for purchase of electric vehicles in India
The Union Budget 2019 has been announced by the Finance Minister Nirmala Sitharaman wherein different policies for various sectors and segments have been announced. The Indian Government will be soon formally launching the National Transport Card which will essentially offer a universal mode of payment for using different types of transportation, which is basically being done to encourage public modes of travel. The Finance Minister also made an announcement of updated GST rates that should benefit electric vehicle manufacturers in India.
The Budget mentions that the Fame 2 program has also ready been helping the sales of EVs in India. In line with that, the GST rate on EVs will reduced from 12 per cent to 5 per cent which should give the much needed boost to the EV sales. Most importantly, the Government also plans to offer an Income tax reduction of Rs 1.5 lakh on the interest of the loan used to purchase an EV in India. The is an important update as it is for the first time that a private owner is entitled to income Tax deduction for the purchase of an EV in India. This would translate into benefits of Rs 2.5 lakh for every consumer purchasing an electric vehicle over the loan period, mentioned the FM.
According to the incentives announced by the Government earlier this year, the FAME 2 scheme offers a benefit of Rs 50,000 each to five lakh e-rickshaws with an ex-factory price of Rs 5 lakh. Additionally, it will offer a benefit of Rs 1.5 lakh each to the 35,000 electric 4W with an ex-factory price of up to Rs 15 lakh. The FAME 2 scheme, that will be implemented for a period of three years, starting from 2019 to 2022, will also offer exemption from road tax and registration charge for hybrids and EVs.