Perquisites – Valuation of Motor Car / Other Vehicles [Rule 3(2)] – Direct and Indirect Taxes with Tax Ready Reckoner

As already discussed, motor car/other vehicles, provided by the employer, is a perquisite only for specified employees because it is a facility provided by the employer to the employees. On the other hand, if the car belongs to the employee and the expenses of running and maintenance of that car are met by the employer, it becomes a perquisite taxable in the hands of all employees as it is an obligation of the employee to maintain his car but such obligation is being met by the employer.

Value of Perquisite per calendar month (Only completed calendar months to be taken)

Sl. No.	*circumstances*	*Where cubic capacity of engine does not exceed 1.6 litres*	*Where cubic capacity of engine exceeds 1.6 litres*
1.	Where the motor car is owned or hired by the employer and the running and maintenance expenses are met or reimbursed by the employer,—
	(a) is used wholly and exclusively in the performance of his official duties;	No value provided that the documents specified below this table are maintained by the employer,	No value provided that the documents specified below this table are maintained by the employer.
	(b) is used exclusively for the private or personal purposes of the employee or any member of his household;	Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car (which will be 10% p.a. of the cost of motor car or cars) and as reduced by any amount charged from the employee for such use.	Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car (which will be 10% p.a. of the cost of motor car or cars) and as reduced by any amount charged from the employee for such use.
	*(c)* is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his household and,—
	(i) the expenses on maintenance and running are met or reimbursed by the employer.	1,800 p.m. (plus Rs. 900 p.m., if chauffeur (driver) is also provided to run the motor car)	Rs. 2,400 p.m. (plus Rs. 900 p.m., if chauffeur (driver) is also provided to run the motor car)
	(ii) the expenses on running and maintenance for such private or personal use are fully met by the employee. Note: When motor car is provided by employer and expenses of running and maintenance expenses for official use is met by employer but for private use is met by employee, it will be covered by this clause (ii).	Rs. 600 p.m. (plus Rs.900 p.m., if chauffeur is provided by the employer to run the motor car) Note: In this case it is not mentioned in the rule that amount charged from the employee should be reduced from the above value.	Rs. 900 p.m. (plus Rs.900 p.m., if chauffeur is also provided to run the motor car) Note: In this case it is not mentioned in the rule that amount charged from the employee should be reduced from the above value.
2.	Where the employee owns a motor car but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are met or reimbursed to him by the employer and,—		.
	(i) such reimbursement is for the use of the vehicle wholly and exclusively for official purposes,	No value provided that the documents specified below this table are maintained by the employer.	No value provided that the documents specified below this table are maintained by the employer
	(ii) such reimbursement is for the use of private or personal purposes of the employee or member of his household	Actual amount incurred by the employer on running and maintenance of motor car including driver’s salary as reduced by the amount charged from the employee for such use.	Actual amount incurred by the employer on running and maintenance of motor car including driver’s salary as reduced by the amount charged from the employee for such use.
	*(iii)* such reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee or any member of his household.	The actual amount of expenditure incurred by the employer as reduced by Rs. 1,800 p.m. (plus Rs. 900 p.m. if chauffeur is also provided) However, in this case, if actual expenses on running and maintenance for official purpose is more than Rs. 1,800/ 2,700 p.m., as the case may be, he can claim such actual amount of expenditure as deduction by maintaining the documents specified below the table. If any amount is recovered from employee the amount so recovered shall be deducted from the above valuation.	The actual amount of expenditure incurred by the employer as reduced by Rs. 2,400 p.m. (plus Rs. 900 p.m. if chauffeur is also provided) However, in this case also, if actual expenses on running and maintenance for official purpose is more than Rs. 2,400/3,300 p.m., as the case may be, he can claim such actual amount of expenditure as deduction by maintaining the documents specified below the table. If any amount is recovered from employee the amount so recovered shall be deducted from the above valuation.
3.	Where the employee owns any other auto-motive conveyance but the actual running and maintenance charges are met or reimbursed to him by the employer and,—
	(i) such reimbursement is for the use of the vehicle wholly and exclusively for official purposes,	No value provided that the documents specified below this table are maintained by the employer.	Not applicable
	(ii) such reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee. If any amount is recovered from employee the amount so recovered shall be deducted from the above valuation,	The actual amount of expenditure incurred by the employer as reduced by an amount of Rs. 900 p.m. However, in this case, if actual expenses on running and maintenance for official purpose is more than Rs. 900 p.m., he can claim such actual amount of expenditure as deduction by maintaining the documents specified below the table. If any amount is recovered from employee the amount so recovered shall be deducted from the above valuation.

Vehicle provided by the employer for commuting from residence to office and back [Explanation to section 17(2)(iii)]:

The use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate. In other words, such use shall not be treated as private or personal use of the employee.

Conveyance facility provided to the High Court Judges and Supreme Court Judges is not taxable.

Where more than one Motor Car is provided

Where one or more motor cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor car or all or any of such motor cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car in accordance with item (1)(c)(i) of the above table as if the employee had been provided one motor car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars in accordance with item (1)(b) of the above table as if he had been provided with such car or cars exclusively for his private or personal purposes.

Specific documents to be maintained for S. No. (1)(a) or S. Nos. (2) and (3) of the above table

(i) the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon;

(ii) the employer gives a certificate that the expenditure was incurred wholly and exclusively for the performance of his official duty.

EXAMPLE :

Compute the perquisite value of the car for the assessment year 2023-24 in the following situation if the taxable monetary emoluments of X are Rs.1,50,000:

(i) The car is owned by X but the running and maintenance expenses amounting to Rs. 40,000 during the previous year are met by the employer. The car is used

(a) for personal benefit of X

(b) only for official duties

(ii) The employer provides a car of 1.5 ltr. engine cubic capacity costing Rs. 5,00,000 exclusively for the personal benefit of X. The expenses incurred on the car are Rs. 52,000

(iii) The employer provides a car (below 1.6 lt.) along with a driver to X partly for official and partly for personal purpose. The expenses incurred by the company are:

(a)	running and maintenance expenses	32,000
(b)	driver’s salary	36,000

(iv) In case (iii) the employer maintains a log book and it is established than 30% of the total mileage of the car is for personal use of X and 70% for official duties.

(v) The employer provides a car (above 1.6 lt.) to X which is used for official work and is also used by X for commuting from his residence to office and back.

(vi) X is provided with 2 cars to be used for official and personal work and the following information is available from the company’s records:

	Car 1 exceeding 1.6 lt.	Car 2 below 1.6 lt.
	Rs.	Rs.
Cost of the car	6,00,000	4,00,000
Running and maintenance	60,800	48,000
Salary of driver	44,000	44,000

SOLUTION :

The solution in each case shall be as under:

(i)

(a) The entire amount of expenditure of Rs.40,000 met by the employer shall be a taxable perquisite. This is an obligation of the employee being discharged by the employer and is therefore, a perquisite taxable in the hands of all employees.

(b) Not a perquisite, if the specified documents are maintained.

(c) In this case, the proportion of official and private use is not known. The perquisite value shall be the amount of expenditure incurred by the employer as reduced by Rs.1,800/2,400 as the case may be, unless the specified documents are maintained to claim deduction higher than Rs.1,800/2,400 p.m.

Therefore, Rs.40,000 – 21,600 = 18,400 will be a perquisite.

(ii) The entire running and maintenance expenses and 10% of cost being the normal wear and tear of car will be a perquisite, i.e., Rs.52,000 + 50,000 = Rs.1,02,000 will be taxable.

(iii) The perquisite value shall be:

	Rs.
For Car: (1,800 x 12)	21,600
For Driver: (900 x 12)	10,800
	32,400

(iv) Same as calculated under (iii) above.

(v) In this case, there is no perquisite because the car is not used for the personal benefit of X. Conveyance facility for commuting from residence to office and back is not considered as a perquisite. However, the specified documents shall have to be maintained.

(vi) In this case, for one car the perquisite value shall be as if it is used for official and personal benefit. The other car will be valued as if it is used exclusively for the personal purposes of X.

The perquisite value shall be calculated as under:

Step 1:

Assume car 1 is used for personal and official use and car 2 is exclusively for X. The value shall be as under:

	Rs.
Car 1 (2400 x 12) + (900 x 12)	39,600
Car 2 Running and maintenance expenses	48,000
10% of the cost for normal wear and tear	40,000
Salary of driver	44, 000
	1,32,000

Therefore total value of perquisite = Rs.39,600 + Rs.1,32,000 = Rs. 1,71,600

Step 2:

Assume car 2 is used for personal and official use and car 1 is exclusively for X. The value shall be as under:

	Rs.
Car 2 (1800 × 12) + (900 × 12)	32,400
Car 1 Running and maintenance expenses	60,800
10% of the cost for wear and tear	60,000
Salary of driver	44,000
	1,64,800

Therefore total value of perquisite = Rs. 32,400 + Rs. 1,64,800 = Rs.1,97,200

In this case, he should treat car 1 to be used partly for performance of duties and partly for personal use. Thus, the perquisite value of the cars shall be Rs. 1,71,600.