The Green Tax: What Changed in 2026
Starting January 2026, India's Green Tax on older vehicles has been fully implemented across all states. The tax applies at the time of registration renewal: 10–25% of road tax for private vehicles older than 15 years, and 10–50% for commercial vehicles older than 8 years. Vehicles registered in highly polluted cities (Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, and 10 others identified by CPCB) face an additional surcharge of 50% on the Green Tax amount.
This creates a new economic equation for owners of older vehicles: is it cheaper to pay the Green Tax and keep driving, or scrap the vehicle and use the incentives toward a new purchase? The answer depends on your vehicle type, age, city, and intended usage.
Green Tax Rates by Vehicle Category
Private Vehicles (Cars, SUVs, Two-Wheelers)
At the 15-year mark, you'll pay 10% of road tax as Green Tax at renewal. This increases to 15% at 20 years and 25% at 25 years. For a car with a road tax of ₹50,000, the Green Tax would be ₹5,000 at 15 years, ₹7,500 at 20 years, and ₹12,500 at 25 years — payable every 5 years at renewal.
For two-wheelers with road tax of ₹3,000–₹8,000, the Green Tax is relatively modest (₹300–₹2,000). Most two-wheeler owners will find it cheaper to pay the tax than scrap the vehicle.
Commercial Vehicles (Trucks, Buses, Taxis)
Commercial vehicles face steeper penalties: 10% Green Tax at 8 years, rising to 50% at 15+ years. For a truck with ₹1,50,000 road tax, this means ₹15,000 at 8 years and ₹75,000 at 15 years — payable annually for commercial registration renewals. This makes the scrappage decision clear for most old commercial vehicles.
Pollution-Hotspot Surcharge
If your vehicle is registered in Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, Lucknow, Kanpur, Patna, or Jaipur, add 50% to the above figures. A 20-year-old car in Delhi pays: ₹50,000 × 15% × 1.5 = ₹11,250 in Green Tax alone, plus normal road tax. At 25 years, it's ₹18,750.
The Scrappage Math: Keep vs. Scrap
Scenario 1: 18-Year-Old Sedan in Delhi
Keep it: Green Tax of ₹11,250 + annual insurance ₹8,000–₹12,000 + maintenance on aging parts ₹30,000–₹50,000/year. Plus the vehicle fails emission tests increasingly often, risking fines of ₹10,000 per violation under MV Act.
Scrap it: Scrap value from RVSF ₹30,000–₹45,000 + Certificate of Deposit giving 5% discount on new car (₹40,000 on an ₹8 lakh car) + road tax rebate ₹7,500–₹12,500 + registration fee waiver ₹5,000–₹8,000. Total benefit: ₹82,500–₹1,05,500.
Verdict: Scrap. The one-time scrappage benefit exceeds 2–3 years of running costs for the old vehicle.
Scenario 2: 16-Year-Old Hatchback in Tier-2 City
Keep it: Green Tax ₹2,000–₹3,000 (lower road tax base, no pollution surcharge) + moderate maintenance. If the car runs well and isn't your daily driver, the annual cost is manageable.
Scrap it: Scrap value ₹20,000–₹30,000 + new car incentives ₹30,000–₹50,000.
Verdict: Keep for now if the vehicle is in good condition. The Green Tax isn't punitive enough at this age in a non-metro city to force the decision. Reassess at 20 years when the tax rate jumps.
Scenario 3: 12-Year-Old Commercial Truck
Keep it: Green Tax at 25–35% of road tax = ₹37,500–₹52,500 per year. Plus mandatory fitness testing costs, higher insurance premiums for older commercial vehicles, and increasing downtime for repairs.
Scrap it: Scrap value ₹1,50,000–₹3,00,000 (trucks have significant ferrous content) + new vehicle incentives + operational savings from a newer, fuel-efficient truck.
Verdict: Scrap. The annual Green Tax alone makes continued operation uneconomical for most commercial operators.
Impact on Scrap Metal Prices
The Green Tax is accelerating vehicle scrapping rates, which increases the supply of ferrous and non-ferrous scrap. For scrap dealers, this means:
- More supply: An estimated 800,000 additional vehicles will be scrapped in 2026 due to Green Tax economics, generating approximately 800,000 tonnes of ferrous scrap.
- Stable prices: Despite increased supply, India's steel industry demand for scrap continues to grow (targeting 50% scrap-based steelmaking by 2030), absorbing the additional volume without significant price depression.
- New business opportunities: Scrap dealers near Automated Fitness Testing Centres can position themselves as advisors, helping vehicle owners understand the keep-vs-scrap economics and facilitating the scrapping process.
The Green Tax has shifted the scrapping decision from optional to economically obvious for most vehicles over 15–20 years old. If you own an aging vehicle, run the numbers for your specific situation — in most cases, the combined scrappage incentives and Green Tax savings make a compelling case for upgrading.