Electric cars in Karnataka may soon become more expensive, with the state government preparing to withdraw the 100% road tax exemption currently extended to battery-operated vehicles. The proposal is part of the Karnataka Motor Vehicles Taxation (Amendment) Bill, 2026, which has been passed by the legislature and is awaiting the Governor’s assent.
The move will end a policy in place since 2016, when the government had exempted electric vehicles from road tax to promote green mobility. While the exemption for electric cars is set to be rolled back, the benefit will continue for electric two-wheelers.
Under the proposed system, the lifetime tax payable at the time of vehicle registration will be linked to the cost of the vehicle. According to Times of India, electric cars priced up to Rs 10 lakh are expected to attract a 5% tax, and those priced between Rs 10 lakh and Rs 25 lakh may be taxed at 8%, while vehicles above Rs 25 lakh will continue to attract a 10% tax, a slab already introduced in 2024 for high-end electric cars.
The amendment marks a significant policy shift at a time when electric mobility is being promoted across the country, particularly amid concerns of rising fuel costs linked to geopolitical tensions in West Asia.
Transport Minister Ramalinga Reddy said the proposed tax will apply only to new vehicle purchases and will not be implemented retrospectively. The decision comes as the government looks to increase revenue, with the transport department setting a collection target of Rs 15,500 crore for 2026–27, Rs 500 crore higher than the previous year. Officials estimate that taxing electric cars across segments could generate around Rs 259 crore annually.
Karnataka remains one of the largest vehicle markets in India, and motor vehicle tax continues to be a major source of revenue. The state already levies road tax ranging from 13% to 18% for internal combustion engine vehicles, depending on price slabs, while two-wheelers attract between 10% and 14%.
The Bill also proposes relief for commercial operators by reducing per seat tax for contract carriage buses and sleeper coaches. Under the revised structure, contract carriage vehicles with more than 12 seats will be taxed at Rs 2,500 per seat, down from Rs 3,500, while sleeper coaches will attract Rs 3,000 per berth compared to the earlier Rs 4,000.