Taxability of Motor Car Perquisites – Use and Transfer

motor car perksPerquisite is a part of gross salary of an individual provided by his employer in addition to the basic salary.  It is the benefit in addition to the basic salary to which the employee has a right by virtue of his employment. One of the perquisites provided by the employer is motor car facilities. Perquisites in respect of motor car will be taxable in the hands of Employee if the same is provided to him by his Employer (Both in case of Transfer as well as Use).


1.      If the Employer transfers (sale) Motor Car to his Employee-

Then, the Perquisite Value will be – Actual cost less depreciation on WDV @ 20% for every completed year.

For instance, Employer purchases a motor car for Rs. 20, 00,000 on 1/05/2007 and the same is sold to the employee for Rs. 12, 00,000 on 1/08/2009


Soln:    Opening Balance (1/5/2007) Rs. 20,00,000

Less: Depreciation 20%                    Rs.  4,00,000


WDV on 1/5/2008                             Rs. 16, 00,000

Less: Depreciation 20%                    Rs. 3, 20,000


WDV on 1/5/2009                            Rs. 12, 80,000

Less: Selling Price                           Rs. 12, 00,000


Therefore, Taxable amount                  Rs. 80,000


In this way, perquisite will be calculated in case of transfer of a motor car and it will be taxable in the hands of Employee.

2.      If the Employer provides Motor Car to his Employee for Use-

Valuation of  perquisite depends upon the purpose for which it is provided.

a)      Perquisite in case used for exclusively Business purpose- Nothing would be taxable.

b)      Perquisite in case used  for exclusively Personal purpose – Amount of expenditure incurred by the employer on maintenance and running of motor car + Amount paid to Driver + 10% p.a. of actual cost of motor car.

c)      Where the motor car is used partly for performance of duties and partly for private or personal purpose of his own or any member of his household –





Motor Car Owned by or Taken on Hire by


Expenses By

Value of Perquisite If CC of Car  is Up to 1.6 litres

Value of Perquisite If CC of Car exceeds 1.6 litres



Rs. 1800 p.m.

Rs. 2400 p.m.



Rs. 600 p.m.

Rs. 900 p.m.



Rs. 1800 p.m. ‘Or” Actual amount of expenses for official use if proper document are maintained

Rs. 2400 p.m. ‘Or” Actual amount of expenses for official use if proper document are maintained



  • In the above cases all the amounts shall be increased by Rs. 900 p.m. for Driver, if any.
  • Where more than 1 motor car are owned or hired by the employer and the employee or any member of the household is allowed the use of such motor car, the value of perquisite shall be the amount calculated as if one car has been provided for partly personal use and all other cars are for personal use.
  • It is to be noted that while calculating perquisite value only completed months shall be taken into account ignoring part of the month.
  • Again in the last case stated above in the table, if proper documents are not maintained then taxable amount will be Rs. 1800 p.m. or Rs. 2400 p.m. respectively.
  • It is to be kept in mind that if any payment is reimbursed by the Employee it would not be taxable.

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