Taxability of Car Expenses When the Car is Hired or Owned by the Employer: H&R Block

H&R Block – Taxability of car expenses when the car is hired or owned by the employer

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H&R Block – Taxability of car expenses when the car is hired or owned by the employer

When the car is owned or hired by the employer, taxability on car expenses is different in comparison to the car being owned by an employee. In  this article we will discuss taxability of car expenses when the car is 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 chargesXXX
    Add: 10% of actual cost of the car (if car is owned by the employer)XXX
    Less: Amount recovered from the employeeXXX
    Balance amount, if positive, is taxable to the employeeXXX
  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 chauffer 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 chauffer is provided, Rs 900/- p.m. is taxable.

H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

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HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

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