The Karnataka government introduced a lifetime tax on all electric four-wheelers in the state, ending earlier exemptions. This is part of efforts to collect an additional Rs 250 crore in motor vehicle taxes this fiscal year after missing the target for the last fiscal year by Rs 1,000 crore. Earlier, the tax only applied to battery-operated vehicles costing over Rs 25 lakh.

The tax was introduced through the Karnataka Motor Vehicles Taxation (Amendment) Bill, 2026, which the state legislature passed on March 26 this year.

The amendment to the Karnataka Motor Vehicle Taxation Act, 1957, is expected to generate “Rs 250 crore” from “the different categories of vehicles which will be registered in the year 2026-27”, according to the Bill.

The Bill has introduced lifetime taxes—earlier exempt for motor cars, jeeps, omni buses and private service vehicles which run on electricity—at 5 per cent of the vehicle’s cost for those priced up to Rs 10 lakh, and 8 per cent for vehicles costing between Rs 10 lakh and Rs 25 lakh. Previously, the lifetime tax for EV cars and other four-wheelers in Karnataka was 10 per cent for vehicles costing above Rs 25 lakh.

The government has also introduced lifetime tax slabs for already registered vehicles at the rate of 93 per cent of the lifetime tax on a new vehicle for four-wheelers up to two years old, and down to 25 per cent for vehicles that are over 15 years old.

The changes also include a reduction in the lifetime taxes for private transport vehicles like luxury buses, sleeper buses, and 12-seater vehicles.

The Bill awaits the Governor’s assent.

State Transport Minister Ramalinga Reddy defended the measures, introduced at a time when fossil fuel supplies to India are constrained due to the West Asia conflict. “This is not intended to meet tax targets. We have a target of Rs 15,000 crore from taxes. We cannot exceed the target. It depends on the number of vehicles registered in the year. We may get an additional 4 to 5 per cent from penalties, etc. There is no intention for greater tax collection,” Reddy said on the floor of the Legislature while seeking the passage of the Bill.

Incidentally, the transport department collected only Rs 14,000 crore in motor vehicle taxes last fiscal year against a target of Rs 15,000 crore, which was still a 10.71 per cent growth in tax collection. The motor vehicles tax target for 2026-27 is Rs 15,500 crore.

“It is considered necessary further to amend the Karnataka Motor Vehicle Taxation Act, 1957 (Karnataka Act No 35 of 1957) to make collection of tax effectively and to reduce the tax payment defaulters for the exchequer of the state and certain other consequential amendments are also made,” the Karnataka government said in its statement of reasons for the new amendment to the Karnataka Motor Vehicles Taxation Act.

The new tax law also specifies a refund of 93 per cent of the lifetime tax refund on EV vehicles on cancellation of a Karnataka registration within a year, and 25 per cent of the life tax if the registration is cancelled after 14-15 years of registration.

It also provides a Rs 1,000 reduction in the registration tax for vehicles with a carrying capacity of 12 passengers, and a reduction for luxury private buses and sleeper buses from Rs 2,500, Rs 3,500 and Rs 4,000, respectively, to Rs 1,500, Rs 2,500 and Rs 3,000.