Taxation of Motor Car Perquisite

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 organisation, you might not be aware of the fact that Income Tax Deptt. will be right after you, taxing the perquisite value of motor car.Here’s 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 the private 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.

	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 and expenses on maintenance and running are met or reimbursed by the employer	Rs. 1,200	Rs. 1,600	Rs. 600
	per month	per month	per month
(II) Car owned/hired by employer but the expenses on running and maintenance for such private or personal use are fully met by the employee.	Rs. 400	Rs. 600	Rs. 600
	per month	per month	per month

	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 and expenses on maintenance and running are met or reimbursed by the employer	Rs. 1,200 per month	Rs. 1,600 per month	Rs. 600 per month
(II) Car owned/hired by employer but the expenses on running and maintenance for such private or personal use are fully met by the employee.	Rs. 400 per month	Rs. 600 per month	Rs. 600 per month

(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 and expenses on maintenance and running are met or reimbursed by the employer	Rs. 1,200 per month	Rs. 1,600 per month	Rs. 600 per month
(II) Car owned/hired by employer but the expenses on running and maintenance for such private or personal use are fully met by the employee.	Rs. 400 per month	Rs. 600 per month	Rs. 600 per month

(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.