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25% road tax concession if old vehicle is scrapped

Written by Nizam Shaikh

During the 2021 Budget, Union Minister of Road, Transport, and Highways, Mr Nitin Gadkari announced that the Government will be introducing new scrappage policies applicable to older vehicles. Now the Government has proposed incentives for scrapping old vehicles in the form of concessions on the road tax for the purchase of a new vehicle. The Government will be offering a concession of 25% on the road tax.

Why Scrapping Old Vehicles?

The Government’s new scrappage policy is in line with the vision of removing old and out-of-date vehicles especially in the commercial sector, that contribute to a higher level of pollution especially in metropolitan cities where the air quality is already low. The Government wants to replace commercial vehicles that have come of age with new vehicles that have better engine technology that is able to burn fuel in an efficient manner reducing carbon emission as well as reducing consumption. The latest generation vehicles also come with new safety features such as airbags, parking sensors, seatbelt reminders, over-speed alerts, crash zones as well as pedestrian safety compliance, making roads safer and reducing the number of fatalities on the road.

Concession Proposal

Ministry of Road Transport and Highways has proposed that the government will offer a 25% concession on the road tax, on the purchase of a new car. The buyer will have to get a Vehicle Scrappage Certificate which will avail the concession. For private vehicles, the concession is 25% and for Commercial Vehicle it is 15%. The incentive is only available when the vehicle is scrapped before 15 years from the date of registration and it’s even less for commercial vehicles, at 8 years. The Government is also in talks with vehicle manufacturers to levy an additional 5% discount to anyone scrapping their old vehicle.


According to the MoRTH, the policy will come into effect from 1st October 2021. The new scrappage policy is likely to remove 51 lakh light motor vehicles that are more than 20 years old and 17 lakh medium and heavy commercial vehicle that are more than 15 years old. The Government is also toughening its rules on driving licences to make sure that the new drivers are skilful and qualified.