Perquisite Valuation of Motor Car (Company Car)

Motor car (aka company car) offered as an employment benefit (perquisite) is common only in top level management these days. Learn how taxability in various scenarios like who owns the vehicle.

This document covers

1. Value of Motor Car provided by the employer to employee
2. Value of Perquisite by way of use of motor car
   1. If the motor car is owned or hired by the employer
   2. If the employee owns a motor car and the running and maintenance expenditure is reimbursed by the employer
   3. If the employee owns any other automotive conveyance and the running and maintenance expenditure is reimbursed by the employer
3. Documentation Required

1. Value of Motor Car provided by the employer to employee

The term perquisite is an inclusive one. There are various perquisites provided by an employer to employee during the course of employment. The value of the perquisites is also taxable in the hands of employee. The employee is required to pay tax only on those perquisites which he enjoys. Motor Car is also one type of perquisite provided by the employer to an employee. Generally, this type of perquisite is provided to top level employees.

2. Value of Perquisite by way of use of motor car

When the employer has provided the motor car to employee during the course of employment, the value of perquisite is computed in three scenarios based on who owns and who uses

2A. If the motor car is owned or hired by the employer

1. If the motor car is used wholly for office purposes : If the motor car is used wholly and exclusively for performance of the office duties , it will be not be treated as perquisite and it is not taxable in the hands of employee.


2. If the motor car is used for both office purpose and personal purpose : If the motor car is used by the employee for both office purpose and personal purpose, the value of perquisite is as follows
   
   

   Reimbursement of Expenses	Cubic Capacity of engine does not exceed 1.6 litres	Cubic Capacity of engine exceeds 1.6 litres
   If reimbursed by employer	1800 per month (plus Rs 900 if chauffer is also provided)	2400 per month (plus Rs 900 if chauffer is also provided)
   If not reimbursed by employer	600 per month (plus Rs 900 if chauffer is also provided)	900 per month (plus Rs 900 if chauffer is also provided)

3. If the motor car is used for personal purposes : If the motor car is used for personal purposes of the employee and the running and maintenance of expenses are reimbursed by employer, the perquisite value in case of Cubic Capacity not exceeding 1.6 litres or exceeds 1.6 litres is as follows.
   Actual cost incurred by employer on Running and maintenance of motor car
   Add : Remuneration paid to Chauffer
   Add : 10% normal wear and tear per annum on motor car
   Less : Any amount paid by the employee
   
   Taxability : Above is fully taxable in the hands of employee. He cannot claim any exemption

2B. If the employee owns a motor car and the running and maintenance expenditure is reimbursed by the employer

1. If the motor car is used wholly for official purpose : If the motor car is used wholly and exclusively for performance of the office duties , it will be not be treated as perquisite and it is not taxable in the hands of employee
2. If the motor car is used for both office purpose and personal purpose : If the motor car is used by the employee for both office purpose and personal purpose, the value of perquisite is as follows.
   1. If Cubic Capacity does not exceed 1.6 litres : Actual value of expenditure- 2700 per month.
   2. If Cubic Capacity exceeds 1.6 litres : Actual value of expenditure- 3300 per month.

2C. If the employee owns any other automotive conveyance and the running and maintenance expenditure is reimbursed by the employer

1. If the vehicle is used for wholly for official purpose : If the vehicle is used wholly and exclusively for performance of the office duties , it will be not be treated as perquisite and it is not taxable in the hands of employee
2. If the vehicle is used for both office purpose and personal purpose : If the vehicle is used by the employee for both office purpose and personal purpose, the value of perquisite is as follows.
   
   Actual value of expenditure - 900 per month.

3. Documentation Required

If the employer or employee claims that the motor vehicle is exclusively used for official purposes or the actual expenses on the running and maintenance of the motor car is more than the above limits, he can claim higher amount provided that he has maintained following documentation

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