Every salaried individual alongwith with salary for their services provided to the employer, look to get additional benefits or amenities provided in kind by the employer free of cost or at a concessional rate, known as Perquisites (also known as perks).

Some of the perquisites like use of telephone, cellular phone are fully exempt in the hands of the employee. But, there are also some perquisites which are exempt only in certain cases or certain amount and some perquisites are fully taxable.

Motor Car facility is one of the perquisites and computing taxable value of this facility worries almost both the employers and employee. Valuation of perquisite in respect of motor car depend on the ownership of that motor car i.e., the car may be owned by you (employee) or your employer.

When Car is owned by the employee

When Car is owned by the employee and the related expenses related is also met by the employee is not taxable if specified documents maintained.

And if the maintenance and running expenses are met or reimbursed by the employer then the taxability depends on the purposes for which car is used, which is given below.

 If the car is used wholly for official purposes – Not a perquisite, hence not taxable.
 If the car is used wholly for private purposes –
step 1 Find out actual expenses incurred by the employer
step 2 Less :amount recovered from the employee.
Balancing amount is taxable value of the perquisite.
 If the car is partly used for official purposes and partly for private purposes –
step 1 Find out actual expenses incurred by the employer
step 2 Less: Amount used for official purpose (A sum calculated @ Rs. 1800 p.m. if cubic capacity of engine is less then 1.6 litres OR @ Rs. 2400 p.m. if cubic capacity of engine is more then 1.6 litres And If chauffeur is provided addition @ Rs.900 p.m. or higher sum as recorded by logbook by employer)
step 3 Less: Amount recovered from the employee (if any).
Balancing amount is taxable value of the perquisite

When the Car is owned or hired by the employer

A. If the maintenance and running expenses are met or reimbursed by the employer

 If the car is used wholly for official purposes – Not a perquisite, hence not taxable.
 If the car is used wholly for private purposes –
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 & tear of the car (@ 10% p.a of actual cost to the employer) or hire charges if car is taken on hire]
step 2 Less: Amount recovered from employee.
Balancing amount is taxable value of the perquisite.
 If the car is partly used for official purposes and partly for private purposes –
A sum calculated @ of Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres or Rs.2,400 per month if such capacity 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).

B. If the maintenance and running expenses are met or reimbursed by the employee

 If the car is used wholly for official purposes – Not a perquisite, hence not taxable.
 If the car is used wholly for private purposes –
 step 1 Find out expenditure incurred by the employer (i.e hire charges if car is taken on rent or normal wear & tear @10% p.a of actual cost of the car if the car is owned by the employer plus salary of the chauffeur, if any, paid or payable by employer).
step 2 Less: Amount recovered from employee.
Balancing amount is taxable value of the perquisite

 If the car is partly used for official purposes and partly for private purposes and maintenance in respect of private use is borne by the employee –
A sum calculated @ of Rs. 600 p.m where the cubic capacity of the engine does not exceed 1.6 litres or Rs.900 p.m if such capacity exceeds 1.6 litres and Rs. 900 per month if chauffeur is provided (Nothing is deductible in respect of any amount recovered from the employe

OTHER POINTS

Car facility between office and residence – The use of motor car by an employee for the purpose of going from residence to the office or from office back to residence, is not chargeable to tax at all.

Monthly calculation as said above is to be calculated on completed month and a part of the month is left out of consideration.