Planning To Buy an Electric Car? What Budget 2023 Was Expected To Offer As Income Tax Benefits

The Indian government introduced the Production Linked Incentive (PLI) scheme for battery production in May 2021 to reduce the cost of this crucial component for electric vehicles. Electric vehicles were incorporated into the PLI scheme for cars and car components in September 2021, with a substantial budget allocation for five years.

Furthermore, electric vehicle sales attracted a 5% Goods and Services Tax (GST), down from the previous 12%. The Ministry of Road Transport & Highways encouraged state governments to exempt electric vehicle buyers from paying road taxes.

When planning to buy an electric car, explore the potential income tax benefits, as well as consider electric car insurance to protect your investment. For the right costs, you can use a car insurance calculator to estimate the premium.

While these efforts are commendable, more incentives were meant to encourage people to buy electric cars.

Following are some significant initiatives anticipated of the Union Budget 2023:

1. Extension Of Interest Deduction On Loan To Purchase Electric Vehicles Till March 2025: The tax benefit for interest on loans to purchase electric vehicles, which was set to expire on March 31, 2023, has been extended until March 31, 2025. Taxpayers can continue to claim a deduction of up to Rs 1.5 lakh per year on the interest paid for electric vehicle loans until the loan is fully repaid. This extended benefit will apply to loans approved up to March 31, 2025, but it’s important to note that only electric vehicles are eligible for this deduction, not hybrid electric vehicles. Electric vehicle insurance was meant to be crucial when considering the financial benefits of purchasing an electric car under Budget 2023.
2. Implementing A One-Time Income Tax Deduction For The Purchase Of An Electric Vehicle: To boost the electric vehicle revolution, the government was expected to consider this when calculating the taxable income of people who buy brand-new electric cars in the year they are purchased.
3. Including Electric Vehicles In The Scope Of Perquisite Rules: According to current income-tax law, a perquisite value in the hands of an employee who has been given a motor vehicle for use by the employer partially for official and partly for personal purposes is regarded as taxable. The prescribed perquisite value falls into two categories; it is slightly higher if the car’s engine capacity is more significant than 1,600cc. When planning to buy an electric car, consider the potential income tax benefits of Budget 2023, but don’t forget to also explore electric vehicle insurance options. *
4. Lower GST Rates For EV Conversion Kits: Electric vehicle conversion kits enable current fuel-powered vehicle owners to transition to EVs at an affordable cost. Reducing the GST rate to 5% and aligning it with electric vehicles can significantly aid these car owners in joining the electric vehicle trend. GST contributes considerably to the cost of EV conversion kits (currently at 18%). With the unprecedented rise in crude oil prices, the case for the electric vehicle industry had become even more compelling.

If you’re contemplating buying an electric car, don’t forget to look into the income tax benefits offered by Budget 2023 and weigh your electric car insurance choices to safeguard your investment.

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