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If you have been considering buying an electric car or bike, well, India's Union Budget 2019, just made it slightly easier to acquire one. The Union Budget 2019, however, didn't offer much respite to the auto industry, besides encouraging manufacture and purchase of electric vehicles.
In addition to the FAME II scheme, where there’s a Rs 10,000 crore subsidy being offered to manufacturers of electric vehicles, the government has now made it easier to pick up electric vehicles by offering more incentives to buyers.
Here’s a look at what’s on offer.
Finance minister Nirmala Sitharaman in her budget speech has proposed to reduce the rate of GST on electric vehicles from 12.5 percent to 5 percent, which should bring down the prices of electric vehicles further. Petrol and diesel cars continue to be taxed at rates going from 18 percent to 28 percent.
The government is looking to make India a hub for manufacturing of electric vehicles including solar storage batteries as well. To encourage purchasing of electric vehicles, the government has proposed a Rs 1.5 lakh additional income tax deduction per year on interest paid on the loan for an electric vehicle.
This means an individual can save up to Rs 2.5 lakh rupees over the loan tenure of five years on an electric vehicle loan, either for cars or two-wheelers. For salaried persons, this is an additional tax-saving measure.
The budget looks to encourage the manufacturing of local electric vehicles. Customs duty is being exempted on electric vehicle components to encourage local manufacturing. On the other hand, customs duty exemption has been removed on some auto parts, which may make regular cars and bikes more expensive.
The government wants to set up mega manufacturing plants such as semi-conductor fabrication, solar photo-voltaic cells, lithium batteries, computer servers, laptops etc. All these will get exemption under 35AD of the Income Tax Act. This act extends investment linked incentives to taxpayers with respect to capital expenditure.
Besides the focus on electric vehicles and encouraging local manufacturing for EV components, the auto industry hasn’t got much respite.
The government has proposed an increase of Rs 1 per litre on petrol and diesel for Special Additional Duty and Rs 1 per litre on petrol and diesel on Infrastructure Cess to mop up the subsidy it is offering on the other hand to electric vehicle manufacturing and purchase. This is to promote e-Mobility in India.
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