Every year the Budget 2026-27 brings a mix of good and bad news for car buyers, and this year is no different. If you're planning to buy a new car or thinking about going electric, these changes will directly affect your wallet. Let's break it down point by point.

Luxury Imported EVs No Longer Get a Free Pass

Until now, imported electric vehicles enjoyed a pretty generous level of duty protection. That's changing, but only for the expensive end of the market. EVs valued up to Rs. 20 million will continue to be imported duty-free. However, anything priced between Rs. 20 million and Rs. 30 million will now attract a 30% duty, and EVs priced above Rs. 30 million will face a 40% duty.

So if you were eyeing a high-end imported EV — think premium Tesla models or other luxury electric brands — the cost just went up significantly. But if you're looking at an affordable or mid-range EV, there's nothing to worry about. That segment remains protected.

Budget 2026-27 FED on Vehicles Above 2,000cc

This is the part everyone's talking about, and there's still some confusion around it. The budget proposes a 40% Federal Excise Duty on imported cars and SUVs with engines between 2,000cc and 3,000cc.

Some are calling this a brand-new tax, while others argue it's simply a revised version of the existing FED structure, since vehicles above 2,000cc were already subject to duty before this. The exact picture will only become clear once the Finance Bill is finalized.

On top of this, there's also talk of a separate carbon levy, ranging from 10% to 19.5% on vehicles above 2,000cc. This is being framed as an environmental measure — bigger engines, bigger tax.

Relief Continues for Local EVs, REEVs and E-bikes

Here's the good news. The government seems committed to supporting the local EV industry. There are plans to cut customs duty on EV batteries, motors, and related components down to as low as 1%, which could lower local assembly costs and eventually make EVs more affordable for everyday buyers.

In addition, the existing exemption on importing CKD kits for EV assembly is proposed to be extended until June 2027 — giving local manufacturers another year of breathing room.

Hybrid car owners can also relax a bit. There's no indication of any change to hybrid tax rates for now, so prices for popular hybrids like the Prius or Aqua should remain stable.

Budget 2026-27 At a Glance

• Large petrol/diesel SUVs (2,000cc–3,000cc and above) are set to become more expensive due to higher FED and a possible carbon levy.
• Imported EVs priced above Rs. 20 million will now face duties of up to 40%.
• Affordable and mid-range EVs remain protected.
• Local EV manufacturing gets a boost — lower component duties and extended CKD exemptions.
• Hybrid tax rates remain unchanged for now.

Our Take

Overall, the government seems to be drawing a clear line between "everyday vehicles" and "luxury vehicles." If you're in the market for a small car, sedan, or budget EV, this budget shouldn't affect you much. But if your plans involved a large imported SUV or a high-end EV, expect a noticeably bigger price tag.

A lot of the exact figures are still pending — final rates will only be confirmed once the Finance Bill is passed. If you're planning a major purchase, it might be worth waiting a little longer until the official notifications are out.