Incentivizing Electric Mobility in India: A Comprehensive Guide to Tax Benefits and Subsidies

India’s automobile industry is witnessing a significant transformation as the government seeks to boost the “Make in India” initiative by offering various schemes and subsidies. These efforts aim to reduce imports, increase exports, and promote the use of biofuels, such as bioethanol, bio-CNG, and biodiesel. The Automotive Component Manufacturers Association of India (ACMA) is focusing on developing innovative technologies and research to reduce pollution and waste. Additionally, the Faster Adoption and Manufacturing of Hybrid and Electric (FAME 2) Vehicles scheme seeks to promote the adoption of electric vehicles (EVs) to curb pollution.

The government is actively working to develop policies and infrastructure to support the growth of the EV sector, offering incentives for plug-in vehicles, R&D initiatives, and state-level benefits to encourage the industry’s expansion. However, India still lags behind other major markets in terms of subsidies provided, which may impact the nation’s ability to achieve its ambitious goal of manufacturing 7 million electric vehicles by 2030.

Need a loan? Experience hassle-free assistance and swift approvals with Refer Loan. Simplify borrowing and achieve your aspirations effortlessly! CONTACT REFER LOAN

Subsidies Available in Automobile Industries

Here, we will discuss the different subsidies and tax benefits available for manufacturers, buyers, and infrastructure developers, with a focus on the incentives provided by the central government and various state governments in India.

The table below outlines a comprehensive list of subsidies and tax benefits available in the Indian automobile industry, specifically targeting electric vehicles and their supporting infrastructure. It covers programs and policies at both the national and state levels, offering a wide range of benefits such as financial incentives, tax deductions, and capital subsidies. The table also provides information on eligibility, application procedures, and the overarching goals of each policy. As we delve deeper into the topic, we will explore the various incentives and tax benefits in detail, shedding light on their importance and impact on the growth and adoption of electric vehicles in India.

Seeking a loan? Discover clear guidance and speedy approvals at Refer Loan. Streamline your borrowing process and effortlessly attain your goals! GET IN TOUCH WITH REFER LOAN

PLI Scheme for the Auto Sector: Benefits, Subsidies, and Application Process

The Production Linked Incentive (PLI) scheme is designed to boost India’s automotive sector, focusing on advanced automotive technologies and auto components. This initiative offers multiple benefits and subsidies for both domestic and foreign companies. Here, we’ll discuss the subsidies available, their benefits, eligibility criteria, application process, and key points to consider.

Subsidy Available:

The PLI scheme provides incentives for incremental sales, encouraging growth in automobile and auto component sales related to advanced automotive technologies. The incentives aim to promote manufacturing in India, reduce imports, and increase exports, ultimately benefiting the overall economy.

The incentives offered by the PLI scheme are linked to the production and sales of automobiles and auto components. The subsidies are designed to encourage companies to invest in India, develop new business models, enter new markets, and expand their product portfolios.

Benefits:

1. Attracts Foreign Direct Investment (FDI) into the Indian automotive sector
2. Encourages domestic companies to invest in new manufacturing facilities
3. Reduces dependency on imports, promoting self-reliance
4. Boosts exports and strengthens India’s position in the global automotive market
5. Generates job opportunities and supports economic expansion.

Eligibility:

Eligible companies include auto Original Equipment Manufacturers (OEMs) and auto component manufacturers that focus on advanced automotive technologies. These companies should meet the investment criteria set forth by the government in terms of sales targets, growth plans, employment targets, product mix, and supply chain management.

How to Apply:

1. Notice for Application: The notice inviting applications will be issued within 60 days.
2. Application Filing Window: Applicants need to file their application within 60 days of the notice being issued, along with a non-refundable fee (to be prescribed).
3. Online Application: Applications must be submitted on the online portal maintained by the Project Management Agency (PMA). If the online portal is unavailable, manual applications can be filed.
4. Scrutiny by PMA: The PMA will scrutinize the application and intimate any deficiencies to the applicant for response.
5. Finalization and Approval: Applicants will be finalized within 60 days of filing applications, and communication of approval will be given within five working days.

Key Points to Consider:

1. The eligible investment includes plant, machinery, equipment, associated utilities, tools, dies, molds, jigs, fixtures, IT and ITES infrastructure related to manufacturing, and certain expenses on buildings (subject to a cap of 10% of eligible investment).
2. The government also offers corporate tax benefits for new manufacturing companies incorporated on or after October 1, 2019, and engaged only in manufacturing, research, or distribution.
3. Various state incentives are available, depending on the location, investment amount, and other factors.
4. Companies must meet the eligibility criteria and adhere to the application process to benefit from the PLI scheme.
   
   

In conclusion, the PLI scheme for the auto sector presents numerous opportunities for growth and development in the Indian automotive industry. By understanding the available subsidies, benefits, eligibility criteria, and the application process, companies can take advantage of this initiative and contribute to India’s economic progress.

FAME India: Incentivizing Electric and Hybrid Vehicle Adoption

FAME India (Speedier Acceptance and Production of (Hybrid &) Electric Vehicles in India) is a governmental program launched in 2015 to tackle pollution arising from gasoline and diesel vehicles, as well as to encourage the uptake and production of electric and hybrid vehicles.The initiative offers various incentives and benefits to encourage people to switch to cleaner transportation options.

Subsidy Available

FAME India operates in two phases, offering different subsidies and incentives for each phase:

1. Phase I (2015-2019): Provided demand incentives for about 2.8 lakh electric and hybrid vehicles, totaling approximately Rs. 360 Crore.
2. Phase II (2019-2024): Offers increased incentives for electric two-wheelers and focuses on the electrification of public transportation.

The subsidy aims to make electric and hybrid vehicles more affordable by providing financial incentives to reduce the upfront cost of the vehicles. These incentives are based on the vehicle’s battery capacity, with the maximum cap being a percentage of the vehicle’s cost.

Benefits

• Reduced vehicle emissions, leading to a cleaner environment and better air quality.
• Lower fuel costs due to increased efficiency and the use of electricity instead of petrol or diesel.
• Increased availability of public and shared electric transportation options.
• Growth in the electric vehicle industry, leading to job creation and technological advancements.

Eligibility

FAME India mainly targets vehicles used for public transport or those registered for commercial purposes in e-3W, e-4W, and e-bus segments.On the other hand, the scheme also encompasses privately-owned registered e-2Ws as part of a broader segment.

How to Apply

To benefit from the FAME India scheme, customers should purchase eligible electric or hybrid vehicles from registered Original Equipment Manufacturers (OEMs) that participate in the FAME India program. The subsidy is generally provided at the point of sale, reducing the upfront cost of the vehicle.

Key Points

• FAME India Phase II focuses on electrification of public transportation, including shared transport.
• Demand incentives for electric two-wheelers have increased from Rs. 10,000/KWh to Rs 15,000/KWh, with the maximum cap raised from 20% to 40% of the vehicle cost.
• Electric three-wheelers will be aggregated by Energy Efficiency Services Limited (EESL) to bring upfront costs to an affordable level.
• Electric buses will be targeted in nine cities with populations over 4 million, and EESL will aggregate the remaining demand for electric buses under the scheme on an OPEX basis.
• FAME India Phase II has led to the support of 4,69,315 Electric Vehicles, with demand incentives amounting to about Rs. 1869 Crores.

Tax Benefits as Incentives in the Indian Automobile Industry

The Indian government has introduced various tax benefits and incentives to promote the growth of the automobile industry, particularly for electric and hybrid vehicles. These benefits aim to make these eco-friendly vehicles more affordable and encourage their adoption. The following sections detail some of the key tax incentives available in India.

Section 80EEB: Income Tax Deduction for Interest on Loan for Electric Vehicles

Under Section 80EEB of the Income Tax Act, individuals can claim an income tax deduction on the interest paid on a loan taken to purchase an electric vehicle. The maximum amount that can be claimed as a deduction is Rs. 1,50,000 per financial year. This benefit is available for loans taken between April 1, 2019, and March 31, 2023.

Goods and Services Tax (GST) Reduction

The Indian government has reduced the Goods and Services Tax (GST) rate on electric vehicles to encourage their adoption. As of July 2019, the GST rate on electric vehicles has been lowered from 12% to 5%. Additionally, the GST rate on electric vehicle chargers and charging stations has been reduced from 18% to 5%.

Customs Duty Exemption on Specific Components

To promote the domestic production of electric vehicles, the Indian government has exempted certain components of electric vehicles from customs duty. This exemption applies to parts and components like the electric motor, motor controller, charger, battery pack, and energy monitor, among others.

Accelerated Depreciation Benefits

Businesses involved in manufacturing or operating electric vehicles can claim accelerated depreciation benefits for income tax purposes. Under the Income Tax Act, these businesses can claim up to 40% depreciation on the cost of electric vehicles and charging infrastructure in the first year itself, allowing them to recover their investment faster.

The Indian government has provided various tax benefits and incentives to promote the adoption of electric and hybrid vehicles in the country. These measures help make electric vehicles more affordable for consumers, while also encouraging manufacturers to invest in the development of eco-friendly transportation options. Overall, these tax incentives play a vital role in shaping a cleaner and more sustainable future for the Indian automobile industry.

Conclusion
India’s government is actively working to support the growth of the electric vehicle sector through various subsidies, tax benefits, and incentives. These efforts, coupled with the “Make in India” initiative and the development of eco-friendly transportation, are crucial to India’s transition towards sustainable mobility. By understanding the various incentives and tax benefits available, stakeholders can contribute to the development of a cleaner, greener, and more sustainable automobile industry in India.

Let Refer Loan guide you through the loan process, from choosing the right option to getting approved fast!

Refer Loan is your one-stop solution for identifying the best loan options at competitive rates. Our team of experts works diligently to guide you step by step through the loan processing journey. We offer personalized assistance in documentation, ensuring accuracy and compliance, and our strong network of lenders helps facilitate fast processing. With Refer Loan, you can trust that we have your back, making the borrowing experience seamless and efficient.