If you’re planning to buy a vehicle in Kerala in 2025, understanding the current road tax structure is crucial. Road tax is a mandatory charge impose by the state government to use its roads and infrastructure. In Kerala, this tax has undergone several significant changes in 2025, impacting both new and existing vehicle owners. Whether you’re purchasing a petrol car, a diesel SUV, or an electric vehicle (EV), these updates can influence your total cost of ownership. In this article, we’ll explore the latest updates on road tax in Kerala, the rationale behind the new rates. And how this may affect you as a vehicle owner. We’ll also discuss the current car loan interest rates in the state to help you make well-informed financial decisions.
Latest Updates on Road Tax in Kerala (2025)
The Kerala state government has revised the road tax slabs in 2025 as part of its broader budget reforms aimed at increasing state revenue, discouraging the use of older, polluting vehicles, and promoting electric mobility. These updates target both private and commercial vehicle segments.
One of the most talked-about changes is the 50% hike in road tax for private vehicles over 15 years old. This increase affects cars, motorcycles, and three-wheelers that have been in use for more than 15 years. The rationale behind this is to discourage the use of older vehicles that tend to be more polluting and less fuel-efficient. According to state estimates, this hike is expect to bring in an additional ₹55 crore annually. Pushing total revenue from old private vehicles to ₹165 crore per year.
Contract carriages, which include commercial vehicles used for transporting passengers like minibuses and vans, have also seen changes in their tax rates. The tax has been standardized based on seating capacity, thereby simplifying the structure. Now, vehicles with 6 to 12 seats will pay ₹350 per seat per quarter, those with 13 to 20 seats will pay ₹600 per seat. Vehicles with over 20 seats are taxed at ₹900 per seat per quarter. In addition, the quarterly tax for sleeper berth buses has been revise from ₹1,800 to ₹1,500 per berth. These updates are project to boost tax revenue from the contract carriage sector by around ₹15 crore annually.
The road tax on electric vehicles (EVs) has also been revised. Previously incentivized to encourage adoption, EVs now face a tiered tax structure based on their cost. EVs priced above ₹15 lakh are now taxed at 8%, while those above ₹20 lakh are tax at 10%. For EVs with battery rental facilities, the road tax is set at 10% regardless of the price. While these new rates mark a shift from the earlier tax-free regime. They are still considered more favorable compared to taxes on fossil fuel-power vehicles. This change is expected to bring in an additional ₹30 crore in state revenue.
Interestingly, the state government has provided relief to stage carriage operators (typically public buses). In a move to boost public transportation and reduce traffic congestion, the road tax for stage carriages has been reduce by 10%. While this may reduce the tax income from this sector by ₹9 crore.It is intend to encourage the deployment of more buses, which in turn could reduce the number of private vehicles on the road.
How Road Tax in Kerala is Calculate
Road tax in Kerala is typically calculate based on multiple factors, including:
- Type of vehicle (two-wheeler, four-wheeler, commercial, or private)
- Engine capacity
- Vehicle cost (ex-showroom price)
- Fuel type (petrol, diesel, or electric)
- Vehicle age
The road tax is usually a one-time payment make at the time of vehicle registration. However, in cases of commercial and transport vehicles, it may be levied quarterly or annually. It depending on the type of service they provide.
For example, a private petrol car costing less than ₹10 lakh may attract a one-time road tax of 10%, whereas a similar diesel car might attract up to 12%. For high-end luxury cars and SUVs costing more than ₹20 lakh, the road tax can go up to 20% or more, especially after the 2025 revisions.
Impact on Vehicle Buyers
The new road tax regime in Kerala has both pros and cons for vehicle buyers. On the positive side, the reduction in tax for stage carriages and public buses can lead to improved public transport options. Also, while the tax rates for EVs have increased. They are still generally lower than those for internal combustion engine (ICE) vehicles. It maintaining Kerala’s focus on promoting clean mobility.
On the downside, buyers of older vehicles and those considering budget electric cars now face steeper costs. The increased tax burden could potentially deter people from purchasing used vehicles, which may particularly affect low-income buyers.
Car Loan Interest Rates in Kerala (2025)
With vehicle prices and road tax rates on the rise, many consumers turn to car loans to ease the financial burden. Fortunately, banks and financial institutions in Kerala continue to offer competitive car loan interest rates in 2025.
As of April 2025, the Kerala Gramin Bank offers car loans at interest rates ranging between 9.50% to 9.90%. With flexible repayment tenures of up to 84 months. Other national and private banks in Kerala offer rates starting from 8.60% for new vehicles, depending on the borrower’s credit profile, employment status, and down payment.
When choosing a car loan, it’s important to compare rates, processing fees, prepayment charges, and loan-to-value (LTV) ratios. Opting for a fixed interest rate can offer predictability in EMI payments. While a floating rate could benefit from any future interest rate reductions.
Tips for Vehicle Buyers in Kerala
- Check Vehicle Age Before Buying: Avoid purchasing vehicles older than 15 years unless necessary, as they now attract a much higher road tax.
- Consider EVs for Long-Term Savings: Even with the updated EV road tax structure, electric cars can still offer savings on fuel and maintenance.
- Compare Car Loan Offers: Always compare car loan interest rates from multiple lenders and choose one that suits your financial condition.
- Use Online Calculators: Utilize online EMI calculators to estimate your monthly repayment and assess affordability.
- Stay Updated: Keep an eye on further government updates or changes in tax policy to make timely and informed decisions.
Conclusion
The updated road tax in Kerala for 2025 represents a well-thought-out balance between encouraging sustainable mobility, generating state revenue, and regulating traffic. Whether you’re a first-time buyer or upgrading to a new vehicle. Understanding the current tax structure and exploring the best car loan interest rates can save you a significant amount in the long run. With the right knowledge and financial planning, navigating Kerala’s updated vehicle taxation system in 2025 can be smooth and efficient.
