HYDERABAD: The state government has increased life tax on various types of vehicles, a move that is expected to generate Rs 4,350 crore in revenue for the transport department in 2025-26. This is up from the Rs 3,996.85 crore it collected in 2024-25.
The new tax rates came into effect on Thursday. The government, however, exempted electric vehicles from life tax with an aim to encourage EV adoption across the state. While officials view the hike as a revenue-boosting measure, the move has drawn mixed reactions from consumers and automobile dealers.
As per the revised structure, life tax on three or four wheelers, including cars, jeeps under non-transport category, omnibuses up to seating capacity of 10 persons, would be 18% for vehicles costing Rs 10 lakh to Rs 20 lakh, 20% for those costing Rs 20-50 lakh and 21% for those costing above Rs 50 lakh at the time of registration.
In 2022, it was 17% for vehicles costing Rs 10 lakh to Rs 20 lakh and 18% for those costing above Rs 20 lakh at the time of registration.
The life tax of 15% of the cost of motorcycles, including tricycles and motor scooters, will be levied on vehicles costing between Rs 1 lakh and Rs 2 lakh, and 18% on vehicles costing above Rs 2 lakh.
The life tax remains the same for vehicles whose cost does not exceed Rs 50,000 and vehicles costing between Rs 50,000 and Rs 1 lakh at 9% and 12% respectively.
“Customers have no other option but to follow the government order,” Ali, a car dealer, told TNIE. “People who have worked hard for five years, saved enough to buy a car, and the moment they book one, they find out that the life tax has increased. This could discourage consumers from buying a new vehicle.”
Stating that in India, buying a car is a big emotion, Ali added that rising new car prices are pushing many buyers towards the used car market, which has not been much affected by the tax increase.
“The revised rates are expected to affect not only car affordability but also overall automobile sales, though the EV sector may benefit from the exemption,” he added.
It is worth mentioning here that the Telangana government introduced a 100% exemption on road tax and registration fees for electric vehicles. This incentive, valid until December 31, 2026, applies to a wide range of EVs, including two- and four-wheelers, commercial passenger vehicles, three-seater auto-rickshaws, light goods carriers, tractors and buses.