This paper proposes a new control scheme of a vector-controlled induction machine (IM) drives in overmodulation range to maximize the voltage utilization of the voltage-source inverter. For an operation in overmodulation region, a modified voltage reference is generated for the space-vector pulsewidth modulation (SVPWM). The harmonic current components in the feedback currents needs to be eliminated before feeding to  the PI current controllers to improve the control performance. The response of PI current controllers in overmodulation range has been analyzed. A composite observer is applied to estimate the harmonic components of the currents, which is good performance without delay compared with the measured currents. The proposed method has been verified by simulation results.