Industry Minstry wants income-tax rebate for electric vehicle buyers

Will buyers opt for an electric/ hybrid car (xEV) if it means paying lower income-tax? The inter-ministerial body headed by the Heavy Industries Ministry for the development of the sector certainly seems to think so.

A final call though is expected to be taken by the Finance Ministry only by April when it announces the incentives package under the ‘National Electric Vehicle Policy'.
Multiple sops

“An income-tax rebate has been suggested as part of an incentive package for the buyer. This is apart from multiple sops proposed for both the customer and the manufacturer,” a Government official told Business Line.

Probably the first such move to promote a manufactured product via an income-tax benefit, individual taxpayers could get an alternative to investment in financial instruments such as life insurance policies or mutual funds.

“If adopted, this should push electric car sales significantly. Two-wheeler sales may not see a benefit as most such customers do not have a taxable income,” Mr Sohinder Gill, CEO of Hero Electric and Director (Corporate Affairs) of the Society of Manufacturers of Electric Vehicles, said.
Cars and bikes

While only Mahindra-Reva makes and sells electric cars in India, others such as Toyota and General Motors have shown interest to follow suit given the right policy environment. In two-wheelers, there are about half a dozen players, though Hero electric claims a 44 per cent market share (85,000 units market in 2011-12).

With the existing Ministry of New and Renewable Energy (MNRE) scheme of 20 per cent factory price subsidy included, the total price benefit for electric cars and two-wheelers could amount to 30-35 per cent.

“The manufacturer can also get a tax holiday on investment in a new plant. There are many things being considered both on the buyer and seller side,” the Government official said.

A study commissioned by the Heavy Industries Ministry to Booz-Allen last year said that a Rs 22,500-crore public investment will be required to reach 6-7 million xEV sales target by 2020.