Under a contractual obligation, Employer company is part financing purchase of car for personal use by senior executives. Car is registered in the name of employer. On retirement, he takes it. Co pays driver's salary, insurance premium, fuel cost & maintenance as per entitlements. What are tax obligation -perquisities?
1. While in service: In substance, the employer has provided the employee with a car (with a chaffeur), and the car is used partly for official and partly for private purposes.. Coy pays driver's salary, insurance premium, fuel cost & maintenance as per entitlements, and the running & maintenance expenses. See Table –II in Rule 3(2)(A) of the Income Tax Rules 1962
A sum calculated @ Rs 1,800 p.m where the cubic capacity of the car does not exceed 1.6.litres or Rs 2,400 p.m if such capacity exceeds 1.6.litres, + Rs 900 per month if chauffeur is provided.
(Nothing is deductible in respect of any amount recovered from the employee.)
2. At the time of retirement: The employee gets the vehicle (partly)free.
The Rule provides thus:
(vii) The value of benefit to the employee resulting from the use by the employee or any member of his household of any movable asset (other than assets already specified in this rule and other than laptops and computers) belonging to the employer or hired by him shall be determined at 10 per cent per annum of the actual cost of such asset or the amount of rent or charge paid or payable by the employer, as the case may be, as reduced by the amount, if any, paid or recovered from the employee for such use.