Punjab Implements New Token Tax

Among the other moves, in Punjab’s finance bill for the next financial year, the Punjab Motor Vehicles Taxation Act, has also been amended which in turn has introduced new token tax in the province.

The provincial government has introduced a new token tax policy aimed at vehicle owners in the region. This policy mandates that the new owner of a vehicle with an engine capacity up to 1000cc must pay the full token tax again upon transferring ownership.

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.

• 1000cc to 2000cc Vehicles: An annual tax of 0.2% of the invoice value will be imposed.
• Exceeding 2000cc Vehicles: The annual token tax will be 0.3% of the invoice value.

Lifetime Token Tax

In addition, the lifetime token tax for vehicles up to 1000cc has been inched up from previous Rs. 15,000 to the new Rs. 20,000.

When transferring ownership of a 1000cc vehicle, the new owner will have to pay the lifetime token tax with a 10% annual discount if the transfer occurs within 10 years. However, if the transfer takes place after 10 years, no lifetime token tax will be charged.

The Impact

These changes are expected to impact vehicle owners financially, especially those dealing in used cars. The shift from engine capacity-based to invoice value-based taxation could result in higher taxes for newer, more expensive vehicles.

This move is likely intended to increase tax revenue and encourage transparency in vehicle transactions. However, it also places a heavier burden on vehicle owners, particularly those purchasing higher-valued cars. The policy’s long-term effects on the automotive market and tax compliance remain to be seen.

Earlier, the Punjab’s government also increased the registration fee under the recent fiscal budget 2024-25. We have written a detailed blog on it, which you can read here.

What do you think about new Punjab Token Tax system? Share your thoughts in the comments section.