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DYK: Road tax is refundable on transfer and cancellation of registration

If you move your vehicle from one state to another, you are eligible for refund of taxes paid to the state from which you are moving out

Road tax is the tax that needs to be paid on your motor vehicle (both for a two-wheeler and a car) for using roads. This tax is applicable on private and commercial vehicles. It is levied by the central government, state government as well as local authorities.

The tax has to be paid at the time of registering your vehicle, and also after it, either on a yearly basis or just once, as lifetime tax, according to the respective state government. If you use the vehicle in a state other than the one where it was registered, you may have to pay the lifetime tax again in the state where you use the car. You would also need to pay the state entry tax. All road taxes after registration need to be paid at the regional transport office (RTO) in your area.

HOW IS IT CALCULATED?

Road tax is calculated as a percentage of the ex-showroom price of the vehicle, and also takes into account the age, seating capacity and weight of the vehicle. Rates differ across states, both at the time of registration and after that. For instance, in Gujarat, the rate is 6% while in Tamil Nadu, it is 10% for cars that cost up to 10 lakh (15% otherwise). Rates also depend on the age of the vehicle. Road tax at the time of registration would include value-added tax (VAT), excise duty and sales tax.

The tax is lower for petrol vehicles than for diesel vehicles. For instance, in Delhi, road tax for petrol cars is 4% and 5% for diesel cars (for cars up to 6 lakh). In Karnataka, the rate is 15% for all cars up to 5 lakh.

Road tax for older vehicles is different. For example, in Tamil Nadu, at the time of re-registration, the rates vary from 6% to 8.75% depending on age of vehicle. Some states also levy a green tax, mostly on commercial vehicles that are older than 15 years.

Under the Central Motor Vehicles Act, you would be required to pay a lifetime road tax if you use a car for more than a year in a state other than the state of registration.

If you take the vehicle to another state within two years of purchase, you might need to pay full amount of lifetime tax in the state where you use the vehicle. Some states offer discounts on such taxes for luxury cars.

TAX IS REFUNDABLE

In case you are scrapping your vehicle and cancel its registration at the RTO, you can get a refund for the taxes paid, but only if you have used it for less than 15 years. You may need to cut out and submit the engine or chassis number and the number plate to cancel your registration.

Also, if you move your vehicle from one state to another, you are eligible for refund of taxes paid to the state from which you are moving out. In some states, re-registration of the vehicle with the state’s registration number might be required, if the vehicle is being used for more than a year. You may also need a no-objection certificate (NOC) from the RTO of the state where you registered the vehicle.

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