Punjab Government Implements New Token Tax

July 3, 2024Zayn0

Among the other changes included in Punjab’s finance bill for the upcoming fiscal year is an amendment to the Punjab Motor Vehicles Taxation Act that resulted in the introduction of a new token tax in the province.

Transfer of Ownership

A new token tax strategy has been introduced by the provincial administration that targets local car owners. According to this policy, when a vehicle with an engine capacity up to 1000cc transfers ownership, the new owner is required to pay the full token tax once more.

Annual Token Tax 

Under the new regulations, the annual token tax for vehicles will no longer be based on engine capacity (cc) but on the invoice value of the vehicle.

Vehicles between 1000 and 2000cc: An annual tax equal to 0.2% of the invoice value will be charged.

Over 2000cc Vehicles: 0.3% of the invoice value will be the annual token tax.

Tax on Lifetime Tokens 

Furthermore, the lifetime token tax for cars under 1000cc has been gradually increased from Rs. 15,000 to Rs. 20,000.

If a 1000cc vehicle is transferred within ten years, the new owner will be required to pay the lifetime token tax, with an annual discount of 10%. However, there won’t be a lifetime token tax if the transfer happens after ten years.

The Impact on Car Owners

Financial effects from these changes are anticipated for car owners, particularly those who deal in secondhand vehicles. The move from engine capacity-based to invoice value-based taxation could result in greater taxes for newer, more expensive automobiles.

This approach most likely aims to promote openness in car transactions and raise tax income. But it also puts more of a strain on car owners, especially those who buy more expensive cars. It is too early to tell how the policy would affect tax compliance and the car industry in the long run.

Before this, the Punjabi government raised the registration cost as part of the most recent fiscal budget for 2024–2025.

Conclusion

Car owners in Punjab will need to be aware of and adjust to the changing environment as the government of the province continues to hone its taxation policy. With possible ramifications for the entire automotive ecosystem in the area, the new token tax signals a substantial change in the way that vehicle ownership and transfers are taxed.

 

Zayn

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