Updated: (As per amended Finance Act, 2020).
Motor Car perquisite is taxable only in case of specified employees (as defined below in note-2). Tax on perquisite value calculated on the basis of whether the motor car is used for official purpose or partly official partly personal purpose or purely for private purpose. The value of the perquisite also depends on the cubic capacity of the engine and whether the employer or employee pays for the car’s maintenance and running cost. Further, the perquisite value of a motor car expenses may be different depending upon whether the car is owned or hired by the employer or owned by the employee. Let us examine here the details.
Motor Car owned or hired by the employer, where maintenance and running expenses including remuneration of the chauffeur are met or reimbursed by the employer
| Motor car used by the employee for official purpose | Motor car used by the employee for partly official and partly personal purpose | Motor car used exclusively for private purpose of the employee or his household |
| Not treated as perquisite: Fully exempt subject to maintenance of specified documents*for cars of all cubic capacity [Read note-1] | Taxable: perquisite value for the car engine capacity up to 1600 CC: Rs.1,800 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) Taxable Perquisite value for the engine capacity of above 1600 CC: Rs.2400 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car). [Note: Nothing is deductible in respect of any amount recovered from the employee]. | Taxable: Perquisite value for cars all engine capacity The actual amount of expenditure incurred by the employer on the running and maintenance of motor car including remuneration paid by the employer to the chauffeur and Add: Depreciation (10% of the actual cost of car) / hire charges (if car is hired) Less: any amount recovered from the employee for such use |
Motor Car owned or hired by the employer, where maintenance and running expenses are met by the employee
| Motor car used by the employee for official purpose | Motor car used by the employee for partly official and partly personal purpose | Motor car used exclusively for private purpose of the employee or his household |
| Not treated as perquisite: Fully exempt subject to maintenance of specified documents* for cars of all cubic capacity [Read note-1] | Taxable : Perquisite value for the engine capacity up to 1600 CC: Actual expenditure incurred by the employer minus Rs. 1800 per month and Rs. 900 per month if the chauffeur is also provided minus amount recovered from the employee. Perquisite value for the vehicle of above 1600 CC: Actual expenditure incurred by the employer minus Rs. 2400 per month and Rs. 900 per month if chauffeur is also provided minus amount recovered from the employee | Taxable: Perquisite value of Actual expenditure incurred by the employer minus amount recovered from the employee |
Where the employee owns any other automotive conveyance and actual running and maintenance charges are met or reimbursed by the employer
| Motor car used by the employee for official purpose | Motor car used by the employee for partly official and partly personal purpose | Motor car used exclusively for private purpose of the employee or his household |
| Not a perquisite: Fully exempt from tax subject to maintenance of specified documents* ( Read Note-1) | Taxable Perquisite value of actual expenditure incurred by the employer minus Rs. 900 per month minus amount recovered from employee | Taxable Perquisite value of actual expenditure incurred by the employer minus amount recovered from the employee |
Note-1: Specified Conditions to be satisfied if the Car is used for official purpose:
- The employer shall maintain complete details of journey undertaken for official purpose including date of journey, destination, mileage, and the amount of expenditure incurred thereon.
- The employer must give a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.
- Content of log book – Complete details of the journey such as date of journey destination, mileage and amount of the expenditure incurred.
- The principle of Arm’s length price will apply while cars taken from related parties.
Note-2: Specified employee means an employee whose monetary income* under the salary exceeds Rs. 50,000 or a director-employee, or an employee who has substantial interest (i.e. beneficial owner of equity shares carrying 20% or more voting power) in the employer-company.(*Monetary Income means Income chargeable under the salary but excluding perquisite value of all non-monetary perquisites)
Note-3: Where more than one car is being provided for use for employee or member of his family then only one car will be valued as partly used for official purpose and partly for private purpose, the other cars will be valued as fully used for private purpose.
Note-4: Car facility used to travel office and back to residence is not regarded as a benefit and is not chargeable to tax.
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