Introduction

The shift towards electric vehicles (EVs) is gaining momentum worldwide as governments push for cleaner, more sustainable transportation. While EVs offer long-term savings on fuel and maintenance, their higher upfront cost often discourages buyers. To address this, government subsidies and incentives have been introduced to make EVs more affordable for consumers.

If you’re considering purchasing an EV, understanding the available subsidies, tax benefits, and grants can help you save a significant amount of money. This guide will walk you through the different types of subsidies for EVs, eligibility criteria, and how to claim these benefits to make your next car purchase more cost-effective.

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Why Are Governments Offering EV Subsidies?

Governments around the world, including India, are offering subsidies for electric vehicles to achieve multiple objectives:

1. Reduce Carbon Emissions – EVs produce zero tailpipe emissions, helping to combat climate change and improve air quality.
2. Promote Sustainable Energy – Encouraging EV adoption supports the use of renewable energy sources like solar and wind power.
3. Lower Fuel Dependence – By reducing reliance on fossil fuels, countries can achieve greater energy security.
4. Boost EV Manufacturing – Subsidies incentivize both consumers and manufacturers, leading to greater investment in EV production and innovation.

India, in particular, has launched several schemes to promote EV adoption, including the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) initiative and state-specific EV policies.

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Types of EV Subsidies & Incentives in India

1. Central Government Subsidies

The Government of India offers several subsidies under the FAME II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme, which provides direct discounts on EV purchases.

FAME II Scheme

• Incentive: Up to ₹15,000 per kWh for electric two-wheelers, three-wheelers, and four-wheelers.
• Maximum subsidy for electric two-wheelers: Up to ₹55,000.
• Maximum subsidy for electric cars (personal use): Up to ₹1.5 lakh.
• Maximum subsidy for electric buses and fleet vehicles: Higher incentives are available for commercial EVs.

Production-Linked Incentive (PLI) Scheme

• Incentive: Aimed at EV manufacturers, offering subsidies to lower production costs and encourage local manufacturing.
• Benefit for buyers: Lower cost of EVs due to reduced manufacturing expenses.

2. State Government Subsidies

Many Indian states provide additional subsidies and tax waivers to further reduce EV costs. Here are some notable state incentives:

Delhi

• ₹5,000 per kWh incentive (up to ₹30,000 for two-wheelers).
• Additional incentives for scrapping old petrol/diesel vehicles.
• Road tax and registration fee exemptions for EVs.

Maharashtra

• ₹5,000 per kWh subsidy (up to ₹10,000 for two-wheelers, ₹1.5 lakh for four-wheelers).
• Additional ₹25,000 early-bird incentive for buyers.
• 100% waiver on road tax and registration fees.

Gujarat

• ₹10,000 per kWh subsidy for two-wheelers, three-wheelers, and four-wheelers.
• No road tax or registration charges for EV buyers.

Tamil Nadu

• Focused on commercial and public transport EVs.
• Incentives for setting up EV charging infrastructure.

Each state offers different levels of support, so check your state’s EV policy for exact benefits.

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Tax Benefits for EV Buyers

In addition to subsidies, EV buyers in India can also benefit from income tax deductions and GST reductions:

1. Income Tax Deduction (Section 80EEB)

• Individuals can claim a deduction of up to ₹1.5 lakh on the interest paid on loans taken for purchasing an EV.
• Available for loans sanctioned between April 1, 2019, and March 31, 2023 (check for extensions).

2. GST Reduction on EVs

• The GST rate on electric vehicles is just 5%, compared to 28% for conventional petrol and diesel cars.
• This significantly lowers the on-road price of EVs.

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How to Claim EV Subsidies in India

To ensure you receive the full benefits of EV subsidies and tax incentives, follow these steps:

Step 1: Choose an Eligible EV

• Check if the EV model you want to purchase qualifies for government subsidies.
• The FAME II website and individual state government portals provide lists of eligible vehicles.

Step 2: Purchase from an Authorized Dealer

• Buy your EV from a government-approved dealership to automatically receive the FAME II subsidy as an upfront discount on the purchase price.
• State subsidies may require additional documentation, which the dealer can guide you through.

Step 3: Apply for Additional State Subsidies (If Applicable)

• Some states require buyers to submit an online application with details such as:
  • Vehicle invoice
  • Registration certificate (RC)
  • Aadhar card/PAN card
  • Bank account details for subsidy transfer

Step 4: Claim Tax Benefits

• If you took a loan to buy the EV, ensure you include the interest payments while filing income tax returns to claim deductions under Section 80EEB.

Step 5: Register Your EV for Road Tax Exemption

• In states offering road tax and registration fee exemptions, ensure that you register your EV under the applicable policy to avoid unnecessary charges.

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Additional Ways to Save Money on an EV Purchase

1. Exchange or Scrap Your Old Vehicle

• Some states offer additional incentives for scrapping old petrol or diesel vehicles when purchasing a new EV.
• Example: Delhi’s EV Policy provides extra discounts when exchanging an old vehicle.

2. Look for Manufacturer and Dealer Discounts

• EV manufacturers often provide festive season discounts or loyalty programs for customers.
• Some automakers also offer corporate discounts for bulk purchases.

3. Consider EV Leasing Options

• If purchasing an EV outright is expensive, consider leasing it through subscription-based EV ownership models, which often include maintenance and insurance.

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Conclusion

Electric vehicles (EVs) are the future of transportation, and governments are actively making them more affordable through subsidies, tax benefits, and incentives. By understanding these financial benefits, you can significantly reduce the cost of buying an EV and contribute to a greener future.

Before purchasing an EV, always check both central and state-level incentives to maximize your savings. Additionally, ensure you follow the correct procedure to claim tax benefits and take full advantage of subsidies.

With the right financial planning and research, buying an EV can be an economically smart and environmentally responsible decision.