Tata Motors, Maruti, Mahindra will benefit from tax deductions on electric vehicles

• Finance Minister Nirmala Sitharaman income tax deduction of ₹1.5 lakh on the interest paid on loans taken to purchase electric vehicles.
• Under the Phase II of the FAME Scheme, the government will also build the necessary charging infrastructure.
• In March 2019, the government had also announced incentives for EV manufacturers and consumers under the FAME-I scheme.

In the Union Budget, Finance Minister Nirmala Sitharaman pushed for the Indian Electric Vehicles mission. In an attempt to make EVs popular, the finance minister announced tax subsidy for people who buy EVs.

“To make electric vehicles affordable to consumers, our government will provide additional income tax deduction of ₹1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around ₹ 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicles,” said Sitharaman.

The Modi government has been bullish about the adoption of EVs in India.

In March, the government announced incentives for EV manufacturers and consumers under the FAME-I scheme. The conditions were that at least 40% of the inputs that bus manufacturers use, have to be made in India. The limit will be higher at 50% for other electric vehicles such as two-wheelers, three-wheelers, cars and e-rickshaws. The proportion will be based on the on ex-factory price of the vehicles.

The Minister during her budget said that Phase-II of FAME Scheme, following approval of the Cabinet with an outlay of ₹10,000 crore for a period of 3 years, has commenced from 1st April, 2019.

“The main objective of the scheme is to encourage faster adoption of Electric vehicles by way of offering upfront incentive on purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles. Only advanced battery and registered e-vehicles will be incentivized under the Scheme with greater emphasis on providing affordable and environment friendly public transportation options for the common man,” she said during the speech.

According to reports under Phase 1 of the FAME scheme, which was launched in 2015, a whopping 2,65,335 electric/hybrid vehicles were given a boost through “demand creation” and steps taken under “charging infrastructure and technological support”.

This will come as good news for the auto industry players like Tata Motors and Mahindra & Mahindra, Maruti Suzuki and Hyundai who have been facing a slowdown in sales. Their electric vehicle segment might see renewed interest from consumers after today’s announcements.

Startups like Ather Energy, Tork and even the recently turned unicorn Ola Electric too will gain from the incentives provided in the Budget.

“The Government’s focus on Electric Mobility and EVs in the Budget 2019 is inspiring. Lower GST rate, interest subvention for EV loans and the commitment of ₹10,000 crore towards FAME 2 are encouraging. This further reinforces Ola’s mission to build Electric Mobility for India and the world and contribute toward making our nation, the global hub for innovation in this space," said Bhavish Aggarwal, Co-founder & CEO of Ola.