Tax Deduction on Electric Vehicles: Boon or Bane?

The latest budget has given a kickstart to begin a new era of electric-vehicle usage to the citizens. The finance minister has recommended a vast reduction in GST on electric vehicles from 12% to 5%. In addition, an income tax deduction of up to Rs.1.5 lakh is provided on the interest paid towards the loan to purchase such vehicles. 

As a result of such change in the provision, the government is encouraging people to buy electric vehicles. This initiative is most probable of boosting the sales of such vehicles. However, one must think of the infrastructure and amenities available for a smooth sail with electric vehicles.

To be precise, there are many other aspects for the usage of such vehicles apart from getting a tax deduction for the purchase. It is necessary to have electric charging points at accessible places.

It is also necessary that the riders know how small repairs can be self-handled. There should be facilities for servicing vehicles. When there is an assurance of handling these issues well, more people will come forward and buy electric vehicles in a more significant number.

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Gowri, a finance professional says, “Petrol prices have been rising every day. This move of promoting electric vehicles with an income tax deduction is appreciable. More and more people would like to purchase electric vehicles from now. It leads to a cleaner environment by reducing CO2 emissions. The maintenance cost of electric vehicles is much lesser as compared to petrol/diesel vehicles.”

On the manufacurers’ front, the electric vehicle industry has welcomed the move of promoting sales through GST reduction. The factors that are affecting the widespread usage of these vehicles are the high cost and limited range of products.

This move taken by the government is especially useful as the NITI Aayog has suggested a ban on two-wheelers below 150cc by 2025 and the conventional three-wheelers by 2023. The committee has recommended the use of electric derivatives in place of the banned vehicles.