Valuation of perquisite in respect of Motor Car – Salaried Individuals

After the abolition of Fringe Benefit Tax from the financial year 2009-2010, many of the perquisites are again taxable in the hands of the employees. Motor Car facility is one of them. The table below provides the basis of valuation of perquisite in respect of motor car provided to the employees:

Different Situations (A) Value of the Perquisites (B)
Where Car is Owned by the employee
  1. When car expenses are met by the employee
 Not a perquisite, hence not taxable
  1. When maintenance and running expenses are met or reimbursed by the employer

(i)     If the car is used wholly for official purposes

(ii)   If the car is used wholly for private purposes

(iii) If the car is partly used for official purposes and partly for private purposes

 No value provided a few conditions are satisfied*

Step 1 – Find out actual expenditure incurred by the employer

Step – 2 Less: Amount recovered from the employee. Balancing amount (if it is positive) is taxable value of perquisite

Step 1 – Find out actual expenditure incurred by the employer

Step 2 – Less: Amount used for official purposes (i.e., a sum calculated at the rate of Rs. 1800 per month where the cubic capacity of engine does not exceed 1.6 litres or Rs. 2400 per month where the cubic capacity of engine exceeds 1.6 litres and Rs. 900 per month if chauffeur is provided or a higher sum for official purposes as per the records of the employer and as certified by the employer.*)

Step – 3 Less: Amount recovered from the employee. Balancing amount (if it is positive) is taxable value of perquisite.
Different Situations (A) Value of the Perquisites (B)
Where Car is Owned or Hired by the employer
  1. When maintenance and running expenses are met or reimbursed by the employer

(i)     If the car is used wholly for official purposes

(ii)   If the car is wholly used for private purposes of the employee or any member of his household

(iii) If the car is partly used for official and partly for private purposes of the employee or any member of his household

No value provided a few conditions are satisfied*

Step 1 – Find out actual expenditure incurred by the employer [i.e., expenditure on running and maintenance including remuneration of the chauffeur plus normal wear and tear of the car (at the rate of 10% p.a. of actual cost to the employer) or hire charges if car is taken on hire]

Step – 2 Less: Amount recovered from the employee. Balancing amount (if it is positive) is taxable value of perquisite

A sum calculated at the rate of Rs. 1800 per month where the cubic capacity of engine does not exceed 1.6 litres or Rs. 2400 per month where the cubic capacity of engine exceeds 1.6 litres and Rs. 900 per month if chauffeur is provided.

Nothing is deductible in respect of any amount recovered from the employee.
  1. When maintenance and running expenses are met by the employee

(i)  If the car is used wholly for official purposes

(ii)   If the car is wholly used for private purposes

(iii) If the car is partly used for official and partly for private purposes and maintenance in respect of private use is borne by the employee.

Not a perquisite hence not taxable

Step 1 – Find out expenditure incurred by the employer [i.e., hire charges if car is taken on hire or normal wear and tear @ 10% of the actual cost of the car if the car is owned by the employer plus salary of chauffeur, if any, paid or payable by the employer]

Step – 2 Less: Amount recovered from the employee. Balancing amount (if it is positive) is taxable value of perquisite

A sum calculated at the rate of Rs. 600 per month where the cubic capacity of engine does not exceed 1.6 litres or Rs. 900 per month where the cubic capacity of engine exceeds 1.6 litres and Rs. 900 per month if chauffeur is provided.

Nothing is deductible in respect of any amount recovered from the employee.

*Where the employer or the employee claims that the motor car is used wholly and exclusively in the performance of the official duty, the following conditions are to be satisfied:

  1. 1.         The employer has maintained complete details of journey undertaken for official purpose which may include the date of journey, destination, mileage and the amount of expenditure incurred thereon.
  2. 2.         The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.

Tax Returns for Financial Year 2010 -11 (March 2011) has started.  Just mail us Form16/ Salary Certificate and details of other income, at info@taxmantra.com . We would take it from there to file your return of income.

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