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Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)] for Computing Salary Income

 

In case employer had provided a car or any other vehicle for the private use of the employee or any other member of his family, it is a perquisite which is taxable in the hands of the employee provided he/she is a employee of a specified category.

The valuation of this perk shall be made as under:

A.        Motor car is owned or hired by employer and its running and maintenance expenses are met or reimbursed by employer.

A. (1) Car is fully used in the performance of official duties of the employee.

When car is used for official work only and the employer or his family is not deriving any benefit, so no perk will be considered in this case. In this case employer is required to maintain complete record of journeys undertaken like date of journey, destination, mileage, amount spent etc. so a log book is required to be maintained. Employer is also required to give a certificate that the expenditure on car had been incurred wholly and exclusively for official work.

Value of Perk = NIL

Note. It does not matter whether the cubic capacity of engine of motor car exceeds 1.6 litres or not.

A. (2) Car is fully used for the private, personal or family purposes of the employee.

When employee or any member of his household is fully using the car for their private/family purpose, so it is a perk taxable in the hands of the employee. Find out the amount spent by the employer on petrol, repairs, depreciation @ 10% of cost of car or cars, salary of driver etc. and in case any amount is charged from the employee the same shall be deducted out of above mentioned expenses incurred by employer and the amount so derived shall be the valuation of this perk.

A(3)    Car is used partly in the performance of duties and partly for private or personal purposes.

(i)         The expenses on maintenance and running are met or reimbursed by the employer

  1. Where cubic capacity of engine does not exceed 1.6 litres ` 1,800 p.m.

  2. Where cubic capacity of engine exceeds 1.6 litres ` 2,400 p.m.

(ii)        The expenses on running and maintenance for private or personal use are fully met by employee himself

  1. Where cubic capacity of engine does not exceed 1.6 litres ` 600 p.m.

  2. Where cubic capacity of engine exceeds 1.6 litres ` 900 p.m.

(iii)       Facility of Chauffeur. In case of chauffeur or driver is also provided by employer to run the motor car ` 900 p.m. shall be added in the above mentioned amounts mentioned in point (i) and (ii) above.

Value of Perk = Amount specified for use of car + ` 900 p.m. for driver’s salary.

Note.:  No deduction shall be allowed out of the value of perk calculated as per points (i), (ii) and (iii) above in respect of any amount charged/recovered by employer from employee as such account.

B.         Car is owned by employee but its running and maintenance expenses are met or reimbursed by employer

(i) Car is being used wholly and exclusively for official purposes.

No value to be taxed but a proper log book must be maintained.

(ii) Car is being used partly for official purposes and partly for personal or private purposes.

Taxable value of this perk shall be calculated as under :

Find out the actual amount of expenditure incurred by employer                     * * *

Less :   1800 p.m. for small car and 2,400 p.m. for big car plus
     ` 900 p.m. for driver or a higher sum for official purposes subject
           to certain conditions                                                                                     * * *

Value of perk                                                                                                             * * *

C.         Where the employee owns any other automotive conveyance but the actual running and maintenance expensive are met or reimbursed by the employer

(i) Employee ‘s convenyance is being used only for official purposes

No value to be taxed but a proper log book is required to be maintained.

(ii) Employee ‘s convenyance used partly for official purposes and partly for personal or private purposes of the employee.

Taxable value of the perk shall be the actual amount of expenditure incurred by the employer as reduced by the amount of 900 p.m. or a higher sum for official purposes subject to certain conditions.

Conditions for claiming higher amount as deduction in respect of official purpose [Applicable to points B and C above]

  1. The employer has maintained complete record/details of journey undertaken for official purposes covering date of journey, destination, mileage and the amount of expenditure incurred thereon; and

  2. The employer gives the certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.

Employee or any member of his household uses more than one car belonging to employer

Valuation of one car (at the choice of the employee) shall be @ ` 1,800 p.m. or ` 2,400 p.m. as the case may be and the valuation of any other car or cars shall be made as if he had been provided with such a car or cars exclusively for his private or personal purposes.

Car at concessional rate :

First of all calculate the value as if car has been provided totally free of cost               * * *

Less any amount charged from the employee for the use of the car                             * * *

Value of perk to be taxed                                                                                                     * * *

Free use of car between office and residence :

Use of employer’s car to go to the place of employee’s work and come back to his residence is not a taxable perk and hence it is ignored.

Conveyance facility to high court and Supreme Court judges

It is fully exempted.

Meaning of Month

Month means a complete calender month and if there is a part of the month, the same shall be ignored.

 
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