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TAXATION OF MOTOR CAR PERQUISITE

OCTOBER 9, 2012 BY ALOK PATNIA

When you might be thrilled to know that your boss will provide you a car for official usage,

owing to your commendable efforts behind the ROI of the organization, you might not be awareof the fact that Income Tax Depts. will be right after you, taxing the perquisite value of motor

car. Heres how the story goes.

(a) Where the motor car is owned or hired by the employer and is used wholly and

exclusively in the performance of his official duties, no motor car perquisite arises in the hands

of the employee, subject to maintenance of documents as prescribed in sub-Para (f) below. No

perquisite arises even if the motor car is owned by the employee himself but the actual running

and maintenance charges (including remuneration of the chauffeur, if any) are reimbursed to him

by the employer, provided that the motor car is used wholly and exclusively for official purposes

and the documents as prescribed in sub-Para (f) below are maintained.

(b) Where the motor car is owned or hired by the employer and is used exclusively for theprivate or personal purpose of the employee, the value of motor car perquisite would be equal

to the actual amount of expenditure incurred by the employer on the running and maintenance of

the motor car (including remuneration of the chauffeur, if any), as increased by the amount

representing 10% of the actual cost of the motor car on account of normal wear and tear and as

reduced by any amount charged from the employee for such use.

(c) Where the motor car is owned by the employee but the actual running and

maintenance charges (including remuneration of the chauffeur, if any) are reimbursed to him

by the employer and such reimbursement is for the use of the vehicle partly for official and

partly for personal or private purposes, the value of motor car perquisite shall be the actual

amount of expenditure incurred by the employer as reduced by the amounts specified in column(I) of the Table below.

(d) Where the motor car is owned or hired by the employer and is used partly in the

performance of his duties and partly for personal or private purposes , the value of

perquisite shall be determined as per the Table below:

Small car

(upto 1.6 ltrs.

engine

capacity)

Large car (above

1.6 ltrs. engine

capacity)

If chauffeur provided by

employer to run the

motor car, an additional

amount as below is also

charged

(I) Car owned/hired by employer andexpenses on maintenance andrunning are met or reimbursed by the

employer

Rs. 1,200per month

Rs. 1,600per month

Rs. 600per month

(II) Car owned/hired by employer butthe expenses on running and

maintenance for such private or

personal use are fully met by the

Rs. 400

per month

Rs. 600

per month

Rs. 600

per month

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7/29/2019 Taxation of Motor Car Perquisite

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employee.

(e) However, where a second or additional cars are provided, such other cars shall be deemed to

be for exclusively personal use and the value of motor car perquisite shall be computed

accordingly.

(f) In a situation described in para (c) above, if it is claimed that the expenses on running and

maintenance of the motor car for official purposes are higher than the amount mentioned in

Column I of the Table above, such higher amount can be claimed as a deduction from the actual

amount of expenditure incurred by the employer, subject to the fulfilment of the following

conditions:

(i) the employer has maintained complete details of journeys undertaken for official purpose

which may include date of journey, destination, mileage and the amount of expenditure incurred

thereon; and

(ii) the employer gives a certificate that the expenditure was incurred wholly and exclusively for

the performance of his official duties