The Government of Tamil Nadu has extended the 100% exemption from motor vehicle tax for all electric vehicles (EVs) in the state for a further two-year period, from January 1, 2026, to December 31, 2027.

The order provides a complete waiver of motor vehicle tax for both transport and non-transport battery-operated vehicles. Exemption applies to all categories of EVs registered in the state during the validity period and eliminates the requirement to pay any lifetime or upfront motor vehicle tax at the time of registration.

The order forms part of the state’s continued implementation of the Tamil Nadu Electric Vehicles Policy, 2023, which aims to accelerate EV adoption, reduce dependence on fossil fuels, and lower the total cost of ownership for electric vehicles.

Motor vehicle tax is a significant cost component for vehicle buyers, and the exemption directly reduces acquisition costs for EV users across private and commercial segments.

The government has cited the steady growth in EV adoption as a key justification for the extension, noting that EV penetration in Tamil Nadu reached approximately 7.8% in 2025, reflecting sustained market momentum.

The extension follows representations from vehicle manufacturers, who informed the government that EV uptake in the state has gained strong momentum and that continuation of the tax exemption is critical to sustaining growth across segments.

Acting on these representations, the Transport Commissioner, through a letter dated 2 December 2025, formally recommended extending the exemption for a further two years in line with the Tamil Nadu Electric Vehicles Policy, 2023.

In addition to granting the exemption, the order directs the Transport Commissioner to submit a detailed analysis on the potential impact of imposing motor vehicle tax on EVs in the future and to compare Tamil Nadu’s EV taxation framework with practices followed by other Indian states.

EV sales in India reached 560,637 units in the third quarter (Q3) of 2025, an over 12.5% year-over-year increase from 497,974 units.

EVs accounted for 8% of the overall automobile sales, which totaled 5,796,216 units in Q3, according to data released by the Ministry of Road Transport and Highways through its Vahan Dashboard.

In 2023, Tamil Nadu planned to attract ₹500 billion (~$6.04 billion) in investments into the EV manufacturing segment and create 150,000 new jobs over the next five years, according to the state government’s EV Policy 2023. Further, the policy would facilitate the manufacturing of EVs, EV components, and charging infrastructure in the state with an EV special manufacturing package.