News in Short

• The government has proposed reducing the minimum fleet requirement for car rental businesses from 50 vehicles to 5.
• The proposal forms part of the draft Rent-a-Cab Scheme 2026.
• The proposed licence fee is Rs 25,000, irrespective of fleet size.
• Licences will remain valid for five years, while rental vehicles will have a maximum age limit of nine years.
• The revised scheme is expected to come into force in January 2027.

Starting a car rental business in India could become easier for small entrepreneurs under a new government proposal. The Ministry of Road Transport and Highways wants to reduce the minimum fleet requirement from 50 vehicles to just five.

The proposed change forms part of the draft Rent-a-Cab Scheme 2026. It aims to encourage startups, smaller entrepreneurs and local operators to enter the car rental sector.

The government also expects the change to help existing businesses expand into new locations. Operators would no longer need to maintain large fleets to establish or grow their businesses.

Rent-a-Cab Scheme 2026 proposes lower fleet requirement

The proposed scheme seeks to replace the existing regulatory framework introduced in 1989. It will cover rental vehicles operated both with and without drivers.

This expands the scope of regulation beyond the self-drive rental segment. It could also make the framework more relevant to businesses offering different types of rental services.

Under the draft rules, operators will need to pay a licensing fee of Rs 25,000, irrespective of fleet size. The licence will remain valid for five years.

The proposal also sets a maximum age limit of nine years for vehicles operating under the scheme.

The revised framework includes online licensing and time-bound approvals. It also proposes stricter safety and insurance requirements, operational standards and a formal grievance redress mechanism.

New car rental rules include stricter safety requirements

The draft scheme outlines several requirements for vehicles offered for rent. All vehicles must have valid registration, fitness certificates and pollution under control certificates.

Operators must also ensure that applicable taxes are paid and no traffic challans remain pending. In addition, they must maintain valid insurance covering all occupants, including the driver.

For vehicles rented with drivers, operators must ensure that drivers hold valid driving licences. The draft also requires them to receive welfare coverage.

The proposal places certain responsibilities on renters as well. They must ensure that vehicle location and tracking devices remain functional throughout the rental period.

If a tracking device becomes defective or stops working, renters must immediately inform the licensee.

When will the new Rent-a-Cab Scheme take effect?

The Ministry of Road Transport and Highways has invited stakeholder comments on the draft scheme until December 5, 2026.

The government will notify the final regulations after considering the feedback. The proposed scheme is expected to come into force in January 2027.

The proposed changes follow a 2021 amendment to the Rent-a-Cab Scheme. That amendment brought battery-operated taxis and vehicles running on green fuels, including ethanol and methanol, under the scheme.

If implemented, the reduction in the minimum fleet requirement could lower the entry barrier for India’s car rental industry. However, operators will still need to meet the proposed licensing, safety, insurance and operational requirements.