Car Lease as part of CTC | How to value perquisite in case Car provided by employer

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VALUE OF PERQUISITE PER CALENDAR MONTH
Sl. No.
Circumstances
Where cubic capacity of engine does not exceed 1.6 litres
Where cubic capacity of engine exceeds 1.6 litres
(1)
(2)
(3)
(4)
(1)
Where the motor car is owned or hired by the employer and—
   (a)   is used wholly and exclusively in the performance of his official duties;
No value:
No value:
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
  (b)   is used exclusively for the private or personal purposes of the employee or any member of his household and the running and maintenance expenses are met or reimbursed by the employer;
Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use.
Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use.
   (c)   is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his household and—
    (i)   the expenses on maintenance and running are met or reimbursed by the employer;
Rs. 1,800 (plus Rs. 900, if chauffeur is also provided to run the motor car)
Rs. 2,400 (plus Rs. 900, if chauffeur is also provided to run the motor car)
  (ii)   the expenses on running and maintenance for private or personal use are fully met by the assessee.
Rs. 600 (plus Rs. 900, if chauffeur is also provided by the employer to run the motor car)
Rs. 900 (plus Rs. 900, if chauffeur is also provided to run the motor car)
(2)
Where the employee owns a motor car but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are met or reimbursed to him by the employer and—
    (i)   such reimbursement is for the use of the vehicle wholly and exclusively for official purposes;
No value:
No value:
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
  (ii)   such reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee or any member of his household.
Subject to the provisions of clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount specified in Sl. No. (1)(c)(i) above.
Subject to the provisions of clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount specified in Sl. No. (1)(c)(i) above.
(3)
Where the employee owns any other automotive conveyance but the actual running and maintenance charges are met or reimbursed to him by the employer and
    (i)   such reimbursement is for the use of the vehicle wholly and exclusively for official purposes;
No value :
Not applicable :
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
  (ii)   such reimbursement is for the use of vehicle partly for official purposes and partly for personal or private purposes of the employee.
Subject to the provisions of clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount of Rs. 900.
Provided that where one or more motor-cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor-car or all of any of such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car in accordance with Sl. No. (1)(c)(i) of Table II as if the employee had been provided one motor-car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of Table II as if he had been provided with such car exclusively for his private or personal purposes.
 
(B) Where the employer or the employee claims that the motor-car is used wholly and exclusively in the performance of official duty or that the actual expenses on the running and maintenance of the motor-car owned by the employee for official purposes is more than the amounts deductible in Sl. No. 2(ii) or 3(ii) of Table II, he may claim a higher amount attributable to such official use and the value of perquisite in such a case shall be the actual amount of charges met or reimbursed by the employer as reduced by such higher amount attributable to official use of the vahicle provided that the following conditions are fulfilled :—
              (a)   the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon;
              (b)   the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.
Explanation.—For the purposes of this sub-rule, the normal wear and tear of a motor-car shall be taken at 10 per cent per annum of the actual cost of the motor-car or cars.
73(3) The value of benefit to the employee or any member of his household resulting from the provision by the employer or services of a sweeper, a gardener, a watchman or a personal attendant, shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services as reduced by any amount paid by the employee for such services.
(4) The value of the benefit to the employee resulting from the supply of gas, electric energy or water for his household consumption shall be determined as the sum equal to the amount paid on that account by the employer to the agency supplying the gas, electric energy or water. Where such supply is made from resources owned by the employer, without purchasing them from any other outside agency, the value of perquisite would be the manufacturing cost per unit incurred by the employer. Where the employee is paying any amount in respect of such services, the amount so paid shall be deducted from the value so arrived at.
74(5) The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees’ household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality. Where any amount is paid or recovered from the employee on that account, the value of benefit shall be reduced by the amount so paid or recovered :
 
Provided that where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, nothing contained in this sub-rule shall apply if the cost of such education or the value of such benefit per child does not exceed one thousand rupees per month.
(6) The value of any benefit or amenity resulting from the provision by an employer who is engaged in the carriage of passengers or goods, to any employee or to any member of his household for personal or private journey free of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by such employer for the purpose of transport of passengers or goods shall be taken to be the value at which such benefit or amenity is offered by such employer to the public as reduced by the amount, if any, paid by or recovered from the employee for such benefit or amenity :

Car Lease as part of CTC
 
This will be useful for highly paid employee , as part of his CTC, is a very efficient tax planning method. Most lease agreements provide for the leased car to be sold to the employee by the leasing company, at the end of a fixed period.
In this arrangement, the Company pays the monthly instalments to the car leasing company and treats these monthly instalments, as part of the employee’s CTC. Additionally, the Company could also reimburse running expenses, the cost of the driver, reimbursement of repairs, etc., which are also treated as part of the CTC. In typical arrangements, the employee is allowed to use the car for official and personal purposes.
However, for purposes of valuation of this perquisite, the Rules specify, interalia, that the value would be Rs 1,800/- per month if the cubic capacity of car is up to 1,600cc and for cars with higher cubit capacity, the perquisite value is Rs 2,400/- per month. Further, a value of Rs 900/- per month is also added if a chauffeur is provided.
 
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