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EV Loans: Checkpoints before applying the same

Here are a few key points that the buyers need to bear in mind before taking an EV loan.

By: Tanesh Gagnani, Executive Director, Akasa Finance Limited

The automobile industry has been developing electric vehicles to reduce the dependence on fuel-powered vehicles as the fossil fuel levels are depleting and environmental concerns are escalating. Fortunately, the growing consciousness to go green and lead a sustainable life has convinced many to switch to electric vehicles over fuel-powered internal combustion engine vehicles. As a matter of course, there is a rising need to avail funds to purchase such vehicles. There exist several financial institutions and options that one can resort to if they want to get an EV loan. However, before taking an EV loan there are a few key points that the buyers need to bear in mind that have been explained in the section below.

Choose the financial institution carefully

The financial institution you are choosing to fund your EV purchase needs to provide a generous interest rate, reasonable processing fee, and flexible repayment time. Any financial institution, be it the banks or any financial services companies, may offer loans for different kinds of EVs such as solely for a two-wheeler, or for three-wheelers or four-wheelers. Currently, there is not much difference in the features of the loans that are extended by the financial institutions for EVs. Nevertheless, make certain that you select the one, which has the provision to offer a considerable amount of the vehicle’s on-road price.

Tanesh Gagnani, Executive Director, Akasa Finance Limited

Ensure that you have a charging equipment/station

According to the Society of Manufacturers of Electric Vehicles (SMEV), an industry body, presently there are about 1800 charging stations installed across India (as of March 2021) and the number is still rising with the government taking it into its hands to install more than 6000 across nine expressways in the country. Needless to say, a charging instrument is a prerequisite to buying an electric vehicle. Thus, it is extremely important that you make sure that either you have charging equipment or your city has the provision for charging an EV. Planning to buy an EV without surveying the facilities for charging the vehicle is going to be futile.

Ensure hassle-free documentation

To avail of any kind of loan, the borrower must be required to submit the pertinent documents for surveillance and verification. However, there are times when this process could become cumbersome because of the uncertainties in the documents required and the process it entails. Therefore, pick the institutions that are credible and that delineate properly the documents that they require. The minimum documents that a borrower is obligated to have in their possession are:

∙      KYC documents such as passport, voter’s identity card, PAN card, Aadhar Card (any of the aforementioned)

∙      Salary slips

∙      Salary account bank statement

∙      Address proof

Therefore, before availing of a loan from any financial institution research their processing system and time to avoid any future difficulty.

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Appraise the allied financial advantages of making the EV purchase

Purchasing an electric vehicle can result in consequent financial benefits. At the present, Section 80EEB of the Income Tax Act allows a total tax exemption of up to Rs 1.5 lakh when settling an EV loan. The aforementioned tax exemption is to be granted to both the owners of a four-wheeler and a two-wheeler. Moreover, the Indian government has introduced several incentives to encourage people to purchase electric vehicles. For better upfront rebates on the purchase of electric vehicles, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme offers subsidies of Rs 15,000 per kWh for two-wheelers and from Rs 10,000 per kWh to Rs 1.5 lakh for four-wheelers. As per the information received from the Department of Revenue, the GST rate on electric vehicles is 5 per cent, the lowest in the slab.

Furthermore, the fee for issuance or renewal of registration certificates has also been exempted as per the recent notification. All in all the prospects of buying an EV look practical and optimistic. Another important aspect that one should keep in mind is the insurance policies available for the kind of electric vehicle they are looking forward to. Currently, the insurance for an electric car may cost more than for an internal combustion engine vehicle.

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.

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