Considering the criticality of adopting EVs, the central government has been taking steps to encourage their usage. It has introduced multiple incentives like easy loans, subsidies in battery, I-T exemptions to component makers etc. The latest action taken by the government is lowering GST from 12% to 5%. The 2019 budget also includes an extra tax benefit of up to Rs 1.5 lakh on the interest of loans sanctioned to customers for buying EVs, with a sum total of Rs 2.5 lakh in the whole loan period.
Auto makers have followed suit and have promised to work together and transform country’s automotive scenario within one year, making it the largest EV hub.
How much can we save
Let’s take a simple comparison between a Maruti WagonR EV and a general Maruti WagonR.
The price of Maruti WagonR ZXi AMT is Rs 5.91 lakh including GST, whereas Maruti WagonR converted EV costs approximately Rs 10 lakh. According to the present norms, GST for non-EV is 18% while for EVS only 5%. Hence, the ex-showroom price after GST cut is Rs 5.91 lakh for the AMT and Rs 9.30 lakh for the WagonR based EV.
The question then becomes if the income tax saving of up to Rs 2.50 lakh on loans is enough incentive for customers to go for EVs. This is where the calculation becomes a little more complex as we need to take the on-road costs of both cars into account.
The RTO evaluation for ZXi AMT is Rs 25,000 whereas it is nil for the EV. Insurance for AMT is Rs 32,000 and it’s Rs 50,000 for the EV. Effective on-road price of non-EV is Rs 6.48 lakh and Rs 9.80 lakh for the WagonR EV. Down payment for both is Rs 2 lakh when the loan amount for the ZXi AMT is Rs 4.48 lakh and for the EV is Rs 7.80 lakh.
The total interest for AMT = Rs 1.10 lakh
Total interest for EV = Rs 1.91 lakh
Annual interest calculated would be Rs 22,000 for the non-EV and Rs 38,200 for the EV. The buyer doesn’t get any tax benefit for the AMT but Rs 38,200 for the EV.
Thus, the government’s proposed policy will help us by using our EV loan as a tax benefit scheme. Of course there is also the added benefit of self-satisfaction we get from not polluting planet Earth.