Budget 2025: Tax wheels on office cars
TNN | Feb 2, 2025, 04.48 PM IST
Many organisations provide a leased car or a company-owned car to some employees. Tax implications depend on the way the car is used. If it is used only for official purpose, there are no tax implications for the employee. However, sometimes, it may be used for both official and personal purposes, in which case the perquisite becomes taxable in the employee’s hands.
When the car is used for official work, the employer is required to keep documents such as details of work-related trips (destination, mileage, expenses incurred). The employer also needs to give a certificate that the expenditure was incurred for official purposes.
When the car is used for both personal and official needs, the car’s cubic capacity determines the value of perquisite. For cars which are of up to 1.6 litres cubic capacity, the perquisite value is 1,800 per month and 2,400 per month for cars with higher capacities. Any running and maintenance expenses of the car that the employer pays are also part of the perquisite value. If the organisation also provides a driver, 900 per month will be added to the taxable perquisite value.
In many cases, an employee may use his or her personal car for work-related trips as well, getting the maintenance and running cost reimbursed. In such a scenario, an amount of 1,800 or 2,400 (depending upon the car’s cubic capacity) per month is not taxable in the hands of the employee. Let’s take an example. If the employer reimburses 15,000 in a month, the taxable perquisite value will be 12,600 ( 15,000 less 2,400).
In all instances, an employee claiming a reimbursement has to provide appropriate documents such as bills.
Hot tips on EV tax
● Individual taxpayers are entitled to a deduction of up to 1.5 lakh on the interest component of vehicle loans to purchase electric vehicles under Section 80EEB. But the loan must have been taken between April 1, 2019 and March 31, 2023.
● As of now, income-tax laws have not prescribed for perquisite valuation norms for electric cars.
When the car is used for official work, the employer is required to keep documents such as details of work-related trips (destination, mileage, expenses incurred). The employer also needs to give a certificate that the expenditure was incurred for official purposes.
When the car is used for both personal and official needs, the car’s cubic capacity determines the value of perquisite. For cars which are of up to 1.6 litres cubic capacity, the perquisite value is 1,800 per month and 2,400 per month for cars with higher capacities. Any running and maintenance expenses of the car that the employer pays are also part of the perquisite value. If the organisation also provides a driver, 900 per month will be added to the taxable perquisite value.
In many cases, an employee may use his or her personal car for work-related trips as well, getting the maintenance and running cost reimbursed. In such a scenario, an amount of 1,800 or 2,400 (depending upon the car’s cubic capacity) per month is not taxable in the hands of the employee. Let’s take an example. If the employer reimburses 15,000 in a month, the taxable perquisite value will be 12,600 ( 15,000 less 2,400).
In all instances, an employee claiming a reimbursement has to provide appropriate documents such as bills.
Hot tips on EV tax
● Individual taxpayers are entitled to a deduction of up to 1.5 lakh on the interest component of vehicle loans to purchase electric vehicles under Section 80EEB. But the loan must have been taken between April 1, 2019 and March 31, 2023.
● As of now, income-tax laws have not prescribed for perquisite valuation norms for electric cars.