Karnataka set to withdraw road tax exemption, e-cars to get costlier

BENGALURU: Buying an electric car in Karnataka may soon get costlier with the state govt preparing to withdraw 100% road tax exemption currently given for battery-operated cars. However, tax exemptions for electric two-wheelers will continue.

The move comes at a time when India is ramping up electric mobility amid fears of a likely fuel price hike stoked by West Asia conflict.

The proposal, part of Karnataka Motor Vehicles Taxation Amendment Bill 2026 passed in the recently concluded legislature session, is awaiting the governor's assent to become law. The one-time tax is paid while purchasing a new vehicle.

If the proposal goes through, then lifetime tax will be linked to the cost of the car: Electric cars priced up to Rs 10 lakh could attract a 5% tax, while those in the Rs 10 lakh-25 lakh bracket may be taxed at 8%. Vehicles priced above Rs 25 lakh are already subject to a 10% tax, and there's no change in the tax matrix. For perspective, a Rs 20-lakh car would attract Rs 1.6 lakh in tax.

Defending the move, transport minister Ramalinga Reddy said the tax will apply only to new vehicles and not retrospectively.

The policy pivot comes as the govt looks to shore up revenues amid rising expenditure on its flagship guarantee schemes. For 2026-27, the transport department was given a target of Rs15,500 crore — Rs500 crore higher than the previous fiscal. Officials estimate that taxing electric cars across segments could generate Rs 259 crore annually.

This marks a significant departure from Karnataka's policy on tax exemption for electric vehicles. To promote green mobility, in 2016, the govt announced tax exemption for EVs to accelerate adoption. In May 2024, the govt decided to bring luxury e-cars under the tax net by imposing a 10% lifetime tax on high-end electric cars. The latest proposal extends levy taxes on all variants of electric cars.

Dealers have started alerting customers about a likely increase in on-road prices, including those who have made advance bookings.


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