The traditional Z-source inverter suffers from large voltage stress across the switches, and discontinuous source current, which is not appropriate for the electric motor drives applications. This paper presents a design and thorough analysis of a trans-Z-source (transformer-based Z-source) with higher boost capability and negligible leakage inductance which overcomes the drawbacks of traditional Z-source inverters (ZSI). Additionally, the fault-tolerant capability of the proposed trans-ZSI is investigated for open-circuit and short-circuit faults occurring in the power semiconductor switches of the inverter module. It proposes a highly efficient faulty leg identification method which is independent of the temperature rise occurring due to high current in the faulty mode. The proposed fault-tolerant scheme is characterized by low cost, fast fault diagnosis irrespective of load, and maintaining post-fault speed characteristics of motor identical to pre-fault characteristics. The experimental results are presented to validate the effectiveness of the proposed method for induction motor drives. Also, a comparative study with similar fault diagnosis strategies is tabulated to validate the potential of the proposed fault-tolerant strategy.