INCOME TAX

ASSESSMENT YEAR: 2014-15

VALUATION OF PERQUISITE IN RESPECT OF

CAR/CONVEYANCE
PARA 44.14
SUBMITTED BY:
SHUBHAM DHIMAN
2038/12
B.COM-III

Valuation of perquisite in respect of

car/conveyance
When employer will provide a car for official/private
usage, owing to employees commendable efforts behind
the ROI of the organisation, they might not be aware of the
fact that Income Tax Deptt. will be right after them, taxing
the perquisite value of motor car. Heres how the story
goes.

Perquisite in respect of Car/Conveyance:

A. Car is owned or hired by an employer, all expenses are incurred by employer:
Situation 1 - Car is owned or hired by an employer, all expenses are incurred by employer
and provided to an employee only for official purposes.
Situation 2 - Car is owned or hired by employer, expenses are incurred by employer and
provided to an employee wholly for personal purposes.
Situation 3 - Car is owned or hired by employer, expenses are incurred by employer and
provided to an employee for partly official and partly personal purposes.

B. Car is owned or hired by employer, provided to an employee for partly official and
partly personal purposes, and expenses for private purposes are incurred by
employee .
C. Car is owned by employee, expenses are incurred by employer and car is used for
partly official and partly personal purposes.
D. Any automotive conveyance (other than car) owned by employee and expenses are
incurred by employer.

A. Car is owned or hired by an employer, all expenses are incurred

by employer:
Situation 2 - Car is owned or hired by employer, expenses are incurred by
employer and provided to an employee wholly for personal purposes:
Entire expenditure incurred by employer (including depreciation at the rate of 10 per cent
per annum of actual cost of the car), is taxable in the hands of employer. Expenses
recovered from employee are deductible.
taxable Value of car:

10% depreciation on actual cost/

Hire charges
xxxxxx
(+) Running expenses
xxxxxx
(=) total expenses
xxxxxx
(-) Amount recovered from
Employee
(=)Taxable amount

xxxxxx
xxxxxx

Situation 3 - Car is owned or hired by employer, expenses are incurred by

employer and provided to an employee for partly official and partly personal
purposes.

Taxable value of car

Small car(1600cc or less)
Rs. 1800 PM

Big car(above 1600 cc)

(+) Driver
(if provided)
(=) taxable value

Rs. 2400 PM
Rs. 900 PM

(+) Driver
(if provided)

Rs. 900 PM

(=) taxable value

Rs. 3300 PM

Rs. 2700 PM

Note: Expenditure recovered from the employee is not deductible.

A. Car is owned or hired by an employer, all expenses are incurred

by employer:
Situation 3 - Car is owned or hired by employer, expenses are incurred by
employer and provided to an employee for partly official and partly personal
purposes.
1.
2.
3.

Rs. 1,800 per month (1600cc or less)/Rs. 2,400 per month (above 1600 cc)
for car is taxable.
If driver is provided, an additional sum at the rate of Rs. 900 per month
shall be taxable.
Expenditure recovered from the employee is not deductible

A. Car is owned or hired by an employer, all expenses are

incurred by employer:

Situation 1 - Car is owned or hired by an employer, all expenses are incurred by employer
and provided to an employee only for official purposes:
Technically it is not a perquisite, as the concerned employee does not get any
personal benefit at the cost of employer. Consequently, nothing is chargeable to tax.
However, the Board has prescribed two conditions [narrated in para 44.14-1] which
are to be satisfied by the employer and only then nothing would be chargeable to tax.

B. Car is owned or hired by employer, provided to an employee

for partly official and partly personal purposes, and expenses
for private purposes are incurred by employee .
1.

Rs. 600 per month (1600cc or less)/Rs. 900 per month (above
1600 cc) for car is taxable.

2. If driver is provided, an additional sum at the rate of Rs. 900

per month shall be taxable.
3.

Expenditure recovered from the employee is not deductible

B. Car is owned or hired by employer, provided to an employee

for partly official and partly personal purposes, and expenses
for private purposes are incurred by employee .

Taxable value of car

Small car(1600cc or less)

Big car(above 1600 cc)

Rs. 600 PM

(+) Driver
(if provided)

Rs. 900 PM
Rs. 900 PM

(+) Driver
(if provided)

Rs. 900 PM

(=) taxable value

Rs. 1800PM

(=) taxable value Rs.1500 PM

C. Car is owned by employee, expenses are incurred by employer

and car is used for partly official and partly personal purposes.
1. Actual expenditure incurred by employer minus expenditure
pertaining to official use minus anything recovered from
employee, is taxable in the hands of employee.
2. Expenditure pertaining to official use can be calculated as per
logbook of the car (if conditions narrated in para 44.14-1 are
satisfied).

3. Alternatively, expenditure pertaining to official use can be

calculated at the rate of Rs. 1,800 per month (1600 cc or less)/Rs.
2,400 per month (above 1600 cc) for car and Rs. 900 per month
for driver.

C. Car is owned by employee, expenses are incurred by employer

and car is used for partly official and partly personal purposes.

Taxable value of car

Small car(1600cc or less)
Total expenditure
(-) Office Use

XXXXX
Rs. 1800 PM

Taxable amount

Total expenditure
(-) Office Use

XXXXX
Rs. 2400 PM

(-) Reovered from

(-) Reovered from

Employee

Big car(above 1600 cc)

xxxxx
xxxxx

Employee

xxxxx

Taxable amount

xxxxx

D. Any automotive conveyance (other than car) owned by

employee and expenses are incurred by employer.
1. If such conveyance is used only for official purposes, nothing is chargeable to
tax.
2. However, the Board has prescribed two conditions [narrated in para 44.14-1]
which are to be satisfied by the employer and only then nothing would be
chargeable to tax.

3. Conversely, if such conveyance is used by the employee partly for official and
partly for private purpose, then actual expenditure incurred by employer minus
expenditure pertaining to official use minus anything recovered from employee,
is taxable in the hands of employee.
4. Expenditure pertaining to official use can be calculated as per logbook of the
car ( if conditions narrated in para 44.14-1 are satisfied). Alternatively,
expenditure pertaining to official use can be calculated at the rate of Rs. 900 per
month.

44.14-1 CONDITIONS TO BE SATISFIED IF CAR IS

USED FOR OFFICIAL PURPOSES

Where the employer or the employee claims that the motor car is used wholly and
exclusively in the performance of official duty , the following two conditions should be
satisfied:
Condition 1 - 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.
Condition 2 - The employer gives a certificate to the effect that the expenditure was
incurred wholly and exclusively for the performance of official duties.

44.14-2 OTHER POINTS

One should also keep in view the following points:
Meaning of month - The word month in the provisions given above denotes completed month
according to the English calendar and a part of the month is left out of consideration.
When two (or more car) are allowed - if an employer provides two or more cars (which fall in
Situation 3), the taxable value in respect of only one such car (selected by the employee) shall
be determined according to the rules given for Situation 3. In respect of other remaining car or cars, the
value of the perquisite shall be calculated under Situation 2.
Car facility between office and residence - The use of motor car by an employee for the purposes of
going from his residence to the place where the duties of employment are to be performed or from such
place back to his residence, is not chargeable to tax.

Conveyance facility to judges - Conveyance facility provided to high court / supreme court judges is
not chargeable to tax.
Conveyance facility to chairman / members of UPSC - Conveyance facility ( including transport
allowance ) provided to serving chairman / members of UPSC is not chargeable to tax.