Taxes on Buying a New Car in India (2025): GST, RTO, Registration Fees & EV Exemptions
Taxes on Buying a New Car in India: Complete Guide for 2025
Purchasing a new car is a major milestone in India, whether it's your first vehicle or a long-awaited upgrade. While car models, mileage, and insurance grab your attention, one often-overlooked aspect is taxation. Understanding the taxes on buying a new car in India is essential for budgeting correctly and avoiding hidden costs.
In this comprehensive guide, we explain the different types of taxes involved in a new car purchase, how they're calculated, applicable GST rates, RTO charges, and potential exemptions or benefits available in 2025.
Table of Contents
1. Overview of Car Taxes in India
When buying a new car in India, you’re responsible for more than just the ex-showroom price. You must also pay various taxes and charges, which significantly increase the on-road price of the vehicle. These typically include:
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Goods and Services Tax (GST)
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Road tax (also called RTO tax)
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Registration and number plate fees
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Insurance
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Handling and logistic charges
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Green tax (in some states)
2. GST on New Cars in India
The Goods and Services Tax (GST) is a central tax applied to the ex-showroom price of the vehicle. The rate depends on the car’s engine capacity, fuel type, and category (hatchback, sedan, SUV, etc.).
GST + Cess Breakdown (2025 Rates)
| Car Type | GST Rate | Compensation Cess | Total Tax |
|---|---|---|---|
| Small cars (under 1200cc) | 28% | 1% - 3% | 29% - 31% |
| Mid-size cars (1200cc–1500cc) | 28% | 15% | 43% |
| Large cars (>1500cc) | 28% | 20% | 48% |
| SUVs (>1500cc, >170mm GC) | 28% | 22% | 50% |
| Electric vehicles (EVs) | 5% | 0% | 5% |
Note: GST is included in the ex-showroom price, but it affects the overall cost significantly.
3. Road Tax (RTO Tax)
Road tax is levied by the state government, and rates vary from one state to another. It is paid once at the time of registration and can range from 6% to 20% of the vehicle's value, depending on:
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State of registration
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Fuel type (diesel/petrol/electric)
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Vehicle cost
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Engine capacity
Example: RTO Tax by State (as of 2025)
| State | Road Tax for Petrol Cars | Electric Vehicle Road Tax |
|---|---|---|
| Maharashtra | 11% – 13% | Exempt (until March 2025) |
| Karnataka | 13% (for cars > ₹10 lakh) | 0% |
| Delhi | 10% – 12.5% | 0% |
| Tamil Nadu | 10% – 15% | 0% (until further notice) |
| Gujarat | 6% – 12% | 0% (under EV policy) |
Tip: Always check your State Transport Department website for the latest rates.
4. Registration Charges
Registration charges include:
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Registration fee: Generally ₹600 – ₹1,500
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High Security Registration Plate (HSRP): ₹400 – ₹1,000
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Number plate allocation: Can be higher for special/fancy numbers
In some states, vehicle registration and road tax are bundled together.
5. Green Tax and Other State Levies
Some states impose a green tax on older vehicles or charge extra for diesel vehicles due to environmental concerns.
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Green tax: Typically ₹500 – ₹1,000 annually
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Environmental cess: Applies in states like Delhi, particularly for diesel SUVs
Also, certain metro cities may charge congestion or pollution levies in the near future.
6. Taxes for Electric Vehicles (EVs) in India
As part of the Indian government's FAME II (Faster Adoption and Manufacturing of Hybrid and
Electric Vehicles) initiative, electric vehicles enjoy multiple tax benefits:
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GST on EVs: Only 5%
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No road tax in most states
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No registration fee (in select states)
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Income tax deduction under Section 80EEB for loans on EVs (up to ₹1.5 lakh interest)
These benefits make EVs significantly cheaper in terms of tax outlay.
7. Tax Benefits on Car Loans in India
For Personal Use:
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No tax deduction on car loan EMIs for personal vehicles.
For Business Use:
If the vehicle is used for business, you may claim:
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Depreciation of the car
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Interest on the car loan as a business expense
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Input tax credit on GST (if registered under GST and vehicle is eligible)
EV Tax Deduction: Section 80EEB of the Income Tax Act allows up to ₹1.5 lakh interest deduction for loans taken to purchase electric vehicles.
8. FAQs on Car Taxes in India
- Is GST included in the car price?
Yes, GST is included in the ex-showroom price of the car.
- Do I pay road tax every year?
No, road tax is typically a one-time payment, though some states offer an annual payment option for commercial vehicles.
- Can I claim GST credit on my car?
Only if the car is used for business purposes and meets eligibility under GST laws.
- Do all states charge the same taxes?
No. Road tax, registration fees, and green taxes vary by state. Always verify with the local RTO.
9. Final Thoughts: Know the True Cost of Ownership
When buying a new car in India, the on-road price can be 15–25% higher than the ex-showroom price due to taxes and fees. Understanding GST, RTO tax, registration charges, and green levies helps you budget accurately and avoid shocks at the dealership.
With electric vehicles getting major tax exemptions in 2025 and increasing awareness of eco-friendly transport, it's also worth considering an EV if you're looking to save on taxes.
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