Investing in EV charging stations? Here are the tax benefits
17 Feb 2025

The Indian government is pushing hard for electric vehicles to combat pollution and reduce dependency on fossil fuels.

A big part of this effort is encouraging investments in EV charging infrastructure.

This article delves into the tax advantages for individuals investing in EV charging stations in India, highlighting the key clauses and sections of the Income Tax Act.

Incentives under Section 80-IA
Infrastructure development

Under Section 80-IA of the Income Tax Act, investors in electric vehicle charging infrastructure are eligible for a 100% profit deduction for 10 years within a 15-year period from the commencement of the operation.

This benefit applies to companies involved in developing or maintaining electric vehicle stations, with the goal of encouraging private sector investment by providing substantial financial advantages.

Accelerated depreciation benefits
Asset depreciation

One more huge advantage is that of accelerated depreciation.

Businesses that invest in EV charging stations can claim depreciation at a higher rate on these assets, thereby reducing their taxable income more rapidly than standard depreciation rates permit.

Under Schedule II of the Income Tax Act, these assets fall under the category of Plant and Machinery, allowing businesses to recover their investment more quickly through tax savings.

Deduction under Section 35AD
Investment allowance

Section 35AD offers a generous investment allowance at 150% on capital expenditure incurred (excluding land, goodwill, and building) wholly and exclusively for setting up an electric vehicle charging station.

This incentive aims to motivate significant upfront investments into this nascent infrastructure by providing immediate tax relief, effectively lowering the cost basis of these assets.

GST implications and benefits
Tax efficiency

The Goods and Services Tax Council has slashed GST rates on electric vehicle charging station services from 18% to 5%.

This reduction makes these facilities more cost-effective for consumers and increases operational profitability for owners.

It is intended to fast-track the development of the electric vehicle ecosystem by stimulating both demand and supply.

Conclusion: Navigating through policies
Strategic planning

Decoding these sections and clauses of the Income Tax Act is vital for investors planning to enter or scale up their presence in the EV charging station domain.

Given the sizable monetary incentives provided by the government, optimizing around these benefits can dramatically improve project viability and ROI in the long run.