clarification on Car Allowance

This query is : Resolved

Ashok Kumar G (Querist)
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03 September 2007 Is there any tax planning that can be made on car allowance for the salaried employees, if so how can we plan

CMA Gul S

CMA Gul S (Expert)
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03 September 2007 Employer's expenses: Rs 1,200 per month if the rating of the car is up to 16 hp or the cubic capacity of the engine is up to 1.88 litres;

otherwise, Rs 1,600 per month is taken as the value of the perquisite. If the employer also provides a chauffeur, an additional amount of Rs 600 is added to the value of the perk.

Employee's expenses: Rs 400 per month if the rating of the car is up to 16 hp or the cubic capacity of the engine is upto 1.88 litres; otherwise Rs 600 per month will be the value of the perquisite. If the employer also provides a chauffeur, an additional amount of Rs 600 is added to the value of the perk.

Official use only: Not a perquisite
Private use only: Actual expenses incurred by the employer
For official and private use: Actual expense incurred by the employer less Rs 600. However, if the employer/employee claims that the amount to be included as perquisite is less than the amount so determined, then proper documentation has to be maintained.