Currently there are no tax credits in India for Biodiesel. A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax, while a deduction only removes a percentage of the tax that is owed. Consumers can get deduction on purchases in their income tax returns, which will lower the total amount of tax they owe to the government. Fuel efficient vehicles and energy efficient appliances and products provide many benefits such as better mileage, lower fuel costs, fewer emissions, lower energy bills and reduced air pollution. In addition to tax incentives, some consumers will also be eligible for utility or state rebates, as well as state tax incentives for energy efficient vehicles and equipment.Carbon Tax
India will soon have a new source of funding to finance clean energy research and development. A carbon tax on the coal industry, will raise fifty rupees for each metric ton of coal used in India. This money will help create India's National Clean Energy Fund and jump-start the renewable industry in this developing country's growing economy. India's tax on coal is one of the first carbon taxes enacted at the national level by any major economy in the world. Tax Credit is an indicator of the growing importance of developing nations in setting the bar for climate leadership, and an example of an innovative strategy for curbing the effects of climate change.
Budget 2010 delivered the first carbon tax in India, in a limited manner. Termed as a cess, and priced at Rs 50 per ton, Carbon Tax is proposed to be levied on coal, both produced domestically as well as imported. Cess is a tax for a defined purpose which does not get consolidated in the generic tax collection basket. The levy is to create the corpus for the National Clean Energy Fund for financing research and innovative clean energy technologies.
Is a carbon tax the way for India to go? No. India already has a carbon tax of sorts that India needs to slash, both for the sake of its economy and environment. Taxes constitute 52 percent of the price of petrol and 32 percent of the price of diesel in India. By contrast, they constitute 18 percent of the price of both petrol and diesel in the United States. 45 and 33 percent respectively in Japan. Even consumers in Europe pay much less than Indians in such fuel taxes.
The net effect of these taxes will be to raise fuel prices and depress energy consumption in India. Indeed, per capita energy consumption in India is not just low by the standards of developed countries but also developing countries. Per capita energy consumption is 17 times less than United States, 8 times less than Denmark and England, 9 times less than Japan and about 2.5 times less than China and Brazil. Indian households pay the highest rate for energy in the world in purchasing power parity terms. Furthermore, because petrol and diesel prices are so exorbitant, this energy consumption is heavily skewed toward even dirtier fuels like coal and wood that power more than half of India's economy. If calls for a global carbon tax escalate, India will face immense pressure to extend its petrol and diesel taxes to coal as well. But putting one of the few affordable sources of energy off-limits would be tantamount to administering hemlock to the Indian economy.