Pl reply
This query is : Resolved
21 February 2014
This is regarding Petrol Reimbursement, Telephone Reimbursement, Perquisites charged on oen car used for company with driver
What is the implications
What is the implications
21 February 2014
Kindly go through these provisions
[10(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;
(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living,[as may be prescribed and to the extent as may be prescribed] :]
[Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;]
[10(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit, as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;
(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living,[as may be prescribed and to the extent as may be prescribed] :]
[Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;]
21 February 2014
Car Allowance Rebate if own Car is used to perform duties related to employment is Es. 1800/- for Car below 1600cc engine? snd Driver's Salary Is Rs. 900/- p.m.?
10 August 2024
In the context of income tax and allowances in India, the treatment of car allowance and driver’s salary involves specific rules. Here’s how you should handle these elements for tax purposes:
### **1. Car Allowance Rebate**
**Car Allowance for Own Car:**
- **Rebate Amount**: The rebate for using your own car for employment duties is generally fixed at Rs. 1,800 per month for cars with engine capacity below 1,600 cc. This amount is usually considered a perquisite under income tax rules.
- **Tax Treatment**: This amount is exempt from tax under Section 10(14) of the Income Tax Act, subject to certain conditions. The car allowance provided to an employee for using their own vehicle for official purposes is generally not taxed if it is within the limits prescribed and used for official duties.
**Conditions for Exemption**:
1. **Ownership**: The car must be owned by the employee.
2. **Usage**: The car should be used for performing official duties.
3. **Rebate Limit**: The rebate is subject to the limit of Rs. 1,800 per month (for cars below 1,600 cc).
### **2. Driver’s Salary**
**Driver's Salary:**
- **Amount**: If the employer provides a car with a driver, the salary of the driver (Rs. 900 per month) is considered a perquisite.
- **Tax Treatment**: The cost of the driver’s salary is treated as a taxable perquisite. It is added to the employee’s income and taxed accordingly. This means the driver’s salary of Rs. 900 per month will be included in the employee's taxable income.
### **Example Calculation**
Let’s say an employee uses their own car for work purposes and receives a car allowance of Rs. 1,800 per month, and also has a driver whose salary is Rs. 900 per month.
- **Car Allowance**: Rs. 1,800 per month is generally exempt from tax, provided the conditions are met.
- **Driver’s Salary**: Rs. 900 per month is considered a taxable perquisite and should be added to the employee’s taxable income.
### **Tax Reporting and Compliance**
1. **Car Allowance**: Ensure that the car allowance is correctly reported in the employee's Form 16, and that any applicable exemption is claimed based on usage for official purposes.
2. **Driver’s Salary**: Include the driver’s salary in the employee’s total taxable income and report it accordingly in the Form 16.
### **Summary**
- **Car Allowance**: Rs. 1,800 per month is generally exempt if the car is used for official purposes.
- **Driver’s Salary**: Rs. 900 per month is taxable and should be added to the employee’s gross income.
Ensure that all allowances and perquisites are handled according to the Income Tax Act and are accurately reported in the employee’s tax returns.
### **1. Car Allowance Rebate**
**Car Allowance for Own Car:**
- **Rebate Amount**: The rebate for using your own car for employment duties is generally fixed at Rs. 1,800 per month for cars with engine capacity below 1,600 cc. This amount is usually considered a perquisite under income tax rules.
- **Tax Treatment**: This amount is exempt from tax under Section 10(14) of the Income Tax Act, subject to certain conditions. The car allowance provided to an employee for using their own vehicle for official purposes is generally not taxed if it is within the limits prescribed and used for official duties.
**Conditions for Exemption**:
1. **Ownership**: The car must be owned by the employee.
2. **Usage**: The car should be used for performing official duties.
3. **Rebate Limit**: The rebate is subject to the limit of Rs. 1,800 per month (for cars below 1,600 cc).
### **2. Driver’s Salary**
**Driver's Salary:**
- **Amount**: If the employer provides a car with a driver, the salary of the driver (Rs. 900 per month) is considered a perquisite.
- **Tax Treatment**: The cost of the driver’s salary is treated as a taxable perquisite. It is added to the employee’s income and taxed accordingly. This means the driver’s salary of Rs. 900 per month will be included in the employee's taxable income.
### **Example Calculation**
Let’s say an employee uses their own car for work purposes and receives a car allowance of Rs. 1,800 per month, and also has a driver whose salary is Rs. 900 per month.
- **Car Allowance**: Rs. 1,800 per month is generally exempt from tax, provided the conditions are met.
- **Driver’s Salary**: Rs. 900 per month is considered a taxable perquisite and should be added to the employee’s taxable income.
### **Tax Reporting and Compliance**
1. **Car Allowance**: Ensure that the car allowance is correctly reported in the employee's Form 16, and that any applicable exemption is claimed based on usage for official purposes.
2. **Driver’s Salary**: Include the driver’s salary in the employee’s total taxable income and report it accordingly in the Form 16.
### **Summary**
- **Car Allowance**: Rs. 1,800 per month is generally exempt if the car is used for official purposes.
- **Driver’s Salary**: Rs. 900 per month is taxable and should be added to the employee’s gross income.
Ensure that all allowances and perquisites are handled according to the Income Tax Act and are accurately reported in the employee’s tax returns.
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