Perquisite – Use of Motor Car

By | May 5, 2026
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Perquisite – Use of Motor Car

Introduction
When an employer provides a car or reimburses expenses for personal or official use, the value of this benefit is taxable as a perquisite under “Salaries.” Taxability depends on ownership, maintenance costs, and usage.

Perquisite Valuation Based on Ownership and Usage

  • Employee-Owned Vehicle with Reimbursement
    • Official Use Only: Taxable value is nil if a logbook and employer certificate confirm official use.
    • Personal Use Only: Taxable value is the reimbursement amount.
    • Mixed Use: Taxable value is the reimbursement minus the amount recovered from the employee and the following additional deduction:
    • Small car (engine capacity upto 1.6 liters): 1,800/month; Big car (exceeding 1.6 liters): Rs. 2,400/month.
    • 900/month if a chauffeur is provided.
  • Employer-Owned Vehicle
    • Official Use Only: Taxable value is nil with proper documentation.
    • Personal Use Only: Taxable value includes:
    • Maintenance and running costs.
    • Driver’s salary.
    • 10% p.a. of car’s actual cost (or hire charges if leased).
    • Less any amount recovered from the employee.
    • Mixed Use:
    • If employer bears costs: 1,800/month (small car) or Rs. 2,400/month (big car).
    • If employee bears costs: 600/month (small car) or Rs. 900/month (big car).
    • Add 900/month if a chauffeur is provided.
  • Other Vehicles
    • If any other vehicle of the employee is used for both office and personal purposes, the taxable value shall be the reimbursed amount less Rs. 900/month and any amount recovered from the employee.
    • If any other vehicle of the employer is used by an employee, the taxable value of the perquisite shall be nil
  • Multiple Cars
    • If multiple cars are used, only one car is assumed for mixed use. Others are treated as personal-use only.

Tax-Free Perquisites for Motor Vehicles

  • Commute Between Office and Residence
    • Tax-free for employer-provided cars or reimbursements.
  • Judges’ Conveyance Facility
    • Tax-free for High Court, Supreme Court Judges, and UPSC members.
  • Free Transport by Transport Undertakings
    • Free rail/air travel for railway and airline employees is exempt.
    • Other transport undertakings: Taxable at the public travel rate minus any employee contribution.