India and EU are nearing a free trade agreement that could slash import duties on car from 110% to 40% ,with tariffs eventually falling to 10%.

In January 2026, India and the European Union reached an important agreement called a Free Trade Agreement, or FTA. This deal took almost 20 years of discussions and negotiations to complete. An FTA is a deal between two or more countries that aims to make trade easier and better for everyone involved. It often includes reducing taxes and tariffs on goods traded between the countries. This agreement is very significant because it marks a new chapter in the relationship between India and the European Union, two very large and important regions in the world.

One of the main points of this agreement focuses on cars. European countries produce a lot of cars, and many of these cars are sold in India. Before the deal, there was a very high import tax or duty on European cars coming into India. Specifically, the duty was set at 110%. This meant that when a European car was exported to India, the importer had to pay a tax equal to 110% of the car’s price. This high tax made European cars very expensive for Indian buyers, so fewer people bought them.

With the new agreement, the duty on European cars will be reduced significantly. The tax will go down from 110% to just 10%. This reduction is important because it will make European cars much cheaper for Indian consumers. But, this change will not happen all at once. The reduction will happen gradually over time, following a set schedule within a certain limit or quota. The agreed limit is 250,000 cars per year. This means only up to 250,000 European cars can benefit from the lower duty each year, at least in the initial stages.

The deal also states that the reductions in import duties will happen gradually. It is important because a sudden drop in tariffs could cause many other issues or disrupt local markets. Gradual changes give both countries time to adjust and plan for the new trade environment.

However, the agreement has some important exclusions. Notably, it does not include any special benefits for electric vehicles, also known as EVs. Electric vehicles are becoming very popular around the world because they produce no tailpipe emissions and are considered better for the environment. Despite their growing importance, the current deal does not offer any special trade advantages for electric cars from Europe to India.

Even though the deal was finalized in January 2026, there is still no official information about exactly when the duty reductions will start. The countries need to go through some formal procedures, called ratification, to make the agreement official and legally binding. Both India and the European Union are expected to ratify the deal soon, but as of now, specific dates have not been announced.

Many people and business leaders are interested in how this deal will impact car prices and sales in India. There is hope that lowering the import duties will lead to cheaper European cars for Indian customers. This could lead to more people buying European cars, which might increase demand and sales. But, since the exact timeline and detailed impacts are not yet confirmed, it is uncertain how big this effect will be in the short term.

This trade deal is important because it aims to strengthen economic ties between India and the European Union. Better trade relations can lead to more cooperation on other issues, such as technology, investment, and employment. It can also help both regions grow their economies by opening new markets and opportunities for businesses.

The agreement’s completion is also a sign of ongoing efforts by both regions to work together in a more open and cooperative way. It took many years of negotiations, and reaching this milestone shows their commitment to improving trade relations.

In summary, the Free Trade Agreement finalized in January 2026 marks a significant step for India and the European Union. It aims to reduce the high import duties on European cars, making them more affordable in India. While the reductions will be gradual and limited to a specific quota, the deal has the potential to change the landscape of trade and car sales between these regions. Both sides are now working towards officially implementing the deal, and many people are watching closely to see how it will unfold in the coming months and years.