Layman’s Guide for Valuation of Perks – Part II


Valuation of Motor car(Rule 3(2) (A))

The perks will be valued as per ownership.

  • Type-1:

Owner:                 Employer

Expenses met by: Employer

Purpose:   Fully official

Taxability:  Not a perk but documents have to be maintained as per rule 3(2)(B).

  • Type 2:

Owner:                 Employer

Expenses met by: Employer

Purpose:   Fully private

Taxability:  All expenditure including driver salary plus 10% of original cost of car. If hired, full hire charges.  From this, recovery from employee can be deducted. The remaining amount will be taxable perk under this head, if amount is positive.

  • Type 3:

Owner:                 Employer

Expenses met by: Employer

Purpose:   Partly official and party private

Taxability:  Monthly valuation of Rs. 1800 for the car and Rs.500 for chauffeur if the car capacity is less than 1.6 litre(hp<16). For cars above this category i.e.hp >16, valuations will beRs.2400 and Rs.900 for chauffeur.  Nothing is deductible in respect of any amount recovered from employee.

Maintenance in respect of private use  is to be borne by employee

Same logic applies for more than one car of company used by one employee.

  • Type 4:

Owner:                 Employer

Expenses met by: Employee

Purpose:   Fully official

Taxability:  Not a perk and hence not taxable.

  • Type 5:

Owner:                 Employer

Expenses met by: Employee

Purpose:   Fully private

Taxability:  All expenditure including driver salary plus 10% of original cost of car is to be taken. If hired, full hire charges is to be taken instead.  From this, expenses met by employee can be deducted. The remaining amount will be taxable perk under this head, if amount is positive

  • Type 6:

Owner:                 Employer

Expenses met by: Employee

Purpose:   Partly official and party private

Taxability:  Monthly valuation of Rs. 600 for the car and Rs.900 for chauffeur if the car capacity is less than 1.6 litre. For cars above this category, valuations will be Rs.900 and Rs.900 for chauffeur.

Nothing is deductible in respect of any amount recovered from the employee. Maintenance in respect of private use  is to be borne by employee

  • Type 7:

Owner:                 Employee

Expenses met by: Employer

Purpose:   Fully official

Taxability:  Not a perk but documents have to be maintained as per rule 3(2)(B).

  • Type 8:

Owner:                 Employee

Expenses met by: Employer

Purpose:   Partly official and party private

Taxability:  Documents have to be maintained as per rule 3(2)(B).

Actual expenditure reimbursed by Employer (Less)

a)Monthly valuation of Rs. 1800 for the car and Rs.500 for chauffeur if the car capacity is less than 1.6 litre(hp<16). For cars above this category, valuation will be actual expenditure (less)Rs.2400 and Rs.900 for chauffeur (or)

b)If  records are maintained as per Rule 3 (2) (B) and higher sum is for actual expenditure i.e more than Rs.1800+500 or Rs. 2400+900, then this amount can be deducted from actual expenditure.

From the above, the amount recovered from employee has to be deducted so as to arrive at taxable perk, if it is positive.

  • Type 9:

Owner:                 Employee

Expenses met by: Employer

Purpose: Fully Private

Taxability: From the actual expenditure incurred by the employer, amount recovered from employee has to be deducted and the balance amount is taxable.

Rule 3(2)(B) says that in order to claim perk exemption for car,

1. Employer should maintain complete details of journey undertaken for official purposes either through driver or through the officer concerned which includes date of journey, destination, mileage and amount of expenditure incurred thereon.. Typical log book contains date, name of officer using, from km, to km, total no. of kms, place visited, expenditure incurred for petrol, maintenance etc.

2. Certificate of immediate officer is necessary mentioning that the expenditure is incurred for wholly and exclusively for performance of official duties on month basis.

The above conditions should also be satisfied  if a car is owned by the employee, expenses are incurred or reimbursed by employer and the employee claims that the expenses for official purposes is more than Rs. 1800 per month for cc rating of 1600cc and Rs.2400 for cc rating above 1600 cc.

  • Car facility between office and residence provided by employer: Not taxable.

C R Venkata Ramani AICWA

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2 thoughts on “Layman’s Guide for Valuation of Perks – Part II

  1. If your case falls on type 9 i.e. vehicle is yours and you use it only for private purposes and employer is reimbursing all your car expenses. In that case, clearly it is given under the said type that all the expenses incurred by employer for your private use of car will be taxable perks. This will be added under perks in your salary income on annual basis and will be taxable according to the slab you are in. Vehicle CC or HP is immaterial in this case.

  2. Hi,

    I had posted this in the part 1 of this series and hence i am reposting my query again.

    After reading your post, i believe that my case would belong to Type 9 from the list on your blog, though you would be the best judge based on the information as given in the subsequent paragraphs of this post.

    About a year back my company changed our salary structure and included certain “fringe benefits”, carved out of the special allowance towards reimbursement against bills of actual expense for the following,

    Books/Periodicals
    4-Wheeler maintanence
    LTA

    In my case i claim Rs 8000 a month towards vehicle expense from my employer, for a car (1000 cc) owned by me.

    The car is for private use only and the employer reimburses vehicle maintainance, driver salary, insurance and fuel cost, on producing bills for the same.

    My question is what would be the additional burden on tax, if any, per month and can you illustrate the excellent post by the way of an example?

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