There are various perquisites which are provided by the employer to employee during the year. Motor car as a perquisite is one of the famous perquisites provided by employer. Generally, this kind of perquisite is provided to senior employees of the organization. The taxability of perquisites is covered under Rule 3 of Income Tax Rules, 1962.
The taxation rules of valuation of motor cars as perquisites are as under:
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1 If motor car is owned or leased by the employer
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee irrespective of cubic capacity of engine.
b) Used for both official and personal purpose
i) If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Rs 1,800 p.m. + Rs 900 p.m. (If driver is provided)
Cubic Capacity exceeding 1.6 litre – Rs 2,400 p.m. + Rs 900 p.m. (If driver is provided)
ii) If running and maintenance cost is reimbursed by the employee
Cubic Capacity within 1.6 litre – Rs 600 p.m. + Rs 900 p.m. (If driver is provided)
Cubic Capacity exceeding 1.6 litre – Rs 900 p.m. + Rs 900 p.m. (If driver is vided)
c) Used exclusively for personal purpose
If the car is used for only personal purpose, it will be fully taxable in the hands of employee irrespective of cubic capacity of engine.
The taxable value is as under:
Actual cost of Running and Maintenance of motor car
Plus: driver’s salary
Plus: normal wear and tear @10% per annum of the actual cost of motor car
Less: any charges recovered from the employe
2. If motor car is owned by the employee but running and maintenance and driver’s salary reimbursed by employer:
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee irrespective of cubic capacity of engine.
b) Used for both official and personal purpose
If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Actual expenses less Rs 2,700 p.m.
Cubic Capacity exceeding 1.6 litre – Actual expenses less Rs 3,300 p.m.
3. If Employee owns any other automotive conveyance but running and maintenance is reimbursed by employer
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee if cubic capacity of engine is within 1.6 litre.
b) Used for both official and personal purpose
If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Actual expenses less Rs 900 p.m.
Cubic Capacity exceeding 1.6 litre – Not Applicable
(Compiled by Taxguru Team)
What’s the taxability in case the car is transferred to the employee after a certain period as per Company policy?