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Car provided to employee

Richa (CA) (63 Points)

30 January 2008

Hi All

Its a bit urgent...

Please confirm when a company provides a car to its employee is any percentage of the said amount added to his salary as perquisite i.e salary alone or sal+monetary value of car........If I am not wrong car benefits are completely removed from perqs and now form a part of FBT which company needs to pay.

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5 Replies

(Guest)

Hi...in your case FBT is applicable. If company pays FBT then there is no need to caluclate perquisites

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parthasarathy (Practising, C.A) (188 Points)
Replied 30 January 2008

If the car is transfered by the employer to the employee, the value of the car (actual cost) reduced by depreciation @ 20% for every completed year and further reduced by the amount received from the employee.........is the value of perquisite.

............If the car is provided by the employer only for use and repairs, running expenses and maintenance charges of such car is paid by the employer, then such expenditure is Fringe benefit and the company is liable for such FBT.

.........Rule - 3(7)(viii) - provides for such perquisite on transfer of motor car.

(Guest)

Dear Parthasarathy. You may be wrong..please find herewith questionaair no 81 which is circulated by the IT department under Circular No 8/2005. "81. Whether employees will be liable to income tax on the perquisite value of motor car provided by the employer in terms of rule 3(7)(vii) of the Income tax Rules relating to use of movable asset. Ans. Since expenditure on running and maintenance of motor cars is liable to FBT, the employees will not be liable to income tax on the perquisite value of motor car provided by the employer in terms of rule 3(7)(vii) of the Income tax Rules relating to use of movable asset."

Richa (CA) (63 Points)
Replied 31 January 2008

Thank You

(Guest)

If an employer sells a used company car to his employee at the time of seperation, does it calls for VAT to be applicable and chargeable to the employee at the selling price.