by Pritesh Khare

Electric vehicles in India didn’t become visible overnight. Their slow but steady appearance on our roads is not accidental—it is the result of a carefully layered system of subsidies, tax tweaks, and state-level incentives working quietly in the background. While the conversation around EVs often revolves around range anxiety, charging infrastructure, and sticker prices, the real story lies in how the government nudges buyers toward electricity over fuel without handing out cash directly.

At the heart of India’s EV push is the understanding that adoption cannot be forced; it has to be made economically sensible. This is where subsidies step in—not as freebies, but as financial cushions designed to absorb the shock of a new technology.

The most talked-about mechanism is the central government’s FAME scheme, short for Faster Adoption and Manufacturing of Electric Vehicles. Under its second phase, the government does not give money directly to buyers. Instead, it reimburses manufacturers for a portion of the vehicle cost, and that benefit reflects as a lower ex-showroom price for the consumer. This approach keeps the transaction clean and reduces paperwork for buyers. However, there’s a clear prioritisation here. Two-wheelers, three-wheelers, and commercial EVs receive the most support. Private electric cars, despite their popularity in headlines, largely sit outside direct central subsidies.

This often surprises buyers, but the reasoning is practical. A subsidised electric scooter replacing a petrol one reduces fuel consumption far more efficiently at scale than subsidising premium electric cars. The government is playing a volume game.

What truly works in favour of EV buyers, though, is something less visible but far more powerful—taxation. Electric vehicles in India attract a GST of just 5 percent. Compare this to petrol or diesel vehicles, which are taxed at 28 percent, along with additional cess that can push the effective tax burden well beyond 40 percent. This gap alone accounts for lakhs of rupees in price difference. It’s a silent subsidy, built into the structure of pricing, and one that benefits every EV buyer without requiring applications or approvals.

There is also a personal finance angle. Under Section 80EEB of the Income Tax Act, individuals who take a loan to purchase an electric vehicle can claim a deduction of up to ₹1.5 lakh on the interest paid. It’s not headline-grabbing, but for salaried buyers, it meaningfully reduces the cost of ownership over time.

Then come the state governments, where the EV story truly fragments—and becomes interesting. Each state has its own EV policy, shaped by local priorities. Some states focus aggressively on consumer adoption, offering direct purchase incentives, complete road tax waivers, and zero registration fees. Others place their bets on manufacturing, battery plants, and job creation, offering fewer benefits to buyers but massive incentives to companies setting up factories.

For a buyer, this means the same electric vehicle can cost significantly less in one state than another. In places like Delhi and Maharashtra, road tax exemptions alone can save tens of thousands of rupees. In some cases, buyers receive a direct subsidy transferred to their bank accounts after purchase. In others, the benefit is already adjusted in the invoice, making the process almost invisible.

Importantly, most buyers don’t need to chase these subsidies. Dealerships are integrated into the system. The reduced price, tax waiver, or refund process is handled behind the scenes. This simplicity is intentional—it removes friction and hesitation from the buying decision.

Yet, subsidies are not meant to last forever. The government has been clear about this. As battery costs fall, domestic manufacturing improves, and charging infrastructure expands, these incentives will gradually shrink. The focus is already shifting from subsidising vehicles to supporting charging networks, grid upgrades, and battery innovation. The idea is not permanent dependence, but temporary support until the ecosystem becomes self-sustaining.

Seen this way, EV subsidies in India are less about generosity and more about strategy. They are tools to reduce oil imports, cut urban pollution, and prepare the country for a future where energy is increasingly electric. The buyer benefits, yes—but so does the larger system.

In the end, when you buy an electric vehicle in India, the discount you see is not just a price cut. It’s policy in action—quiet, calculated, and shaping the direction of mobility one decision at a time.