Taxability on Car Expenses Provided by the Employer | H&R Block

Employee Car Expenses Taxability When Car Owned by the Employer

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Employee Car Expenses Taxability When Car Owned by the Employer

When the car is owned or hired by the employer, taxablity on car expenses is different in comparison to the car being owned by a employee. In  this article we will discuss taxability of car expenses when the car provided by the employer.

When company owns or hires a car for its official use, taxability of the car expenses depends upon purpose of use and the nature of expenses incurred by the employer or the employee.

  1. If the employee uses the car solely for official purpose, reimbursements paid are not taxable.
  2. If the car is used for private purpose by the employee or any member of his family then taxable amount will be calculated as follows:
  • Expenses by the employer including salary of driver and hiring charges
  • Add: 10% of actual cost of the car (if car is owned by the employer)
  • Less: Amount recovered from the employee
  • Balance amount, if positive, is taxable to the employee
  1. If car expenses are borne by the employer and the car is used for both private and official purpose, then taxable amount is calculated at the rate of Rs. 1800/- p.m where cubic capacity of the car is 1.6 ltr. If the cubic capacity of the car exceeds 1.6 ltr, tax exemption is calculated at the rate of Rs. 2400/- p.m. If a chauffeur is provided, Rs. 900/- p.m. is taxable.
  2. If car expenses are borne by the employee and the car is used for both private and official purpose, then taxable amount is calculated at the rate of Rs. 600/- p.m where cubic capacity of the car is 1.6 ltr. If the cubic capacity of the car exceeds 1.6 ltr, taxable amount is calculated at the rate of Rs. 900/- p.m. If a chauffeur is provided, Rs. 900/- p.m. is taxable.
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1 Comment

  1. Junaid chaudhary says:

    if car is borne by me for both official & business purpose . & my driver Amount is Per Month 15000 & Petrol is 20000 then what will be taxable amount.

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