Saturday, June 9, 2012

VALUATION OF PERQUISITES - MOTOR CAR


on Saturday, June 9, 2012

After abolition of the FBT tax from Financial year 2009-10 ,many perks are again taxable in the hands of the employees again .Car facility is one of the them .There is always a confusion among the employer as well as in the employees that how to value the facility of car provided to the employee .

Income tax rules has provided the method to value such perks. We have summarized the rule in a table to under stand the rules in easy way .The table is provided as under .Please do not forget to read the note given under the table .

  1. In simple terms where car is used for official purpose ,there is no perk value to be added.
  2. where car is used for private purpose only full expense cost including driver salary and depreciation @10 % will be added (where car owned by employer ) will be value of perks.
  3. In third case where car is used partly for official and partly for official purpose in that case rate has be specified per rules and now there is no role of estimate from employer or from Assessing officer side 

NOTE:FOLLOWING CHART HAS BEEN AMENDED AFTER AMENDMENT IN RULES ON 18.12.2009 APPLICABLE FROM FINANCIAL YEAR 2009-10 (These rules are also applicable in current year Fy 2012-13)

Download Amendment in new Rules from here (INCOME-TAX (THIRTEENTH AMENDMENT) RULES, 2009 - SUBSTITUTION OF Rule 3 and insertion of rule 40F
Valuation of perquisite in respect of motor car:

Private purposeOfficial PurposePrivate and official purpose
Car owned by the employee and expenses met by him
Not a perquisiteNot a perquisiteNot a perquisite
Car owned by the employee and expenses are reimbursed by the employer
Actual expenses of employer 
less: amount recovered from the employee
balance amount will be perquisites in employee's hand
Not a perquisite(see Note-1)1.calculate actual expenditure on by employer 
2.less:if car hp < 16, perquisite is Rs.1200 1800p.m., if hp>16 Rs.1600 2400 p.m. with Rs.600  900 p.m. chauffeur salary. or higher sum as recorded by logbook by employer 
3.Less :amount recovered from the employee (if any)
Car is owned/ hired by the employer and expenses met by the employer
1.Actual Expenses by employer
2. Plus  depreciation (10% of the original cost of car)/ hire charges(if car is hired) 
3.Less :amount recovered from the employee
Not a perquisite(see note-1)if car hp < 16, perquisite is Rs. Rs.1200 1800p.m.., if hp>16 Rs.1600 2400 p.m. with 600  900 p.m. chauffeur salary.


Note :nothing is deductible in respect of any amount recovered from employee.
Car is owned/ hired by the employer and expenses met by the employee
1.Depreciation(10 % of the original cost of the car)/ hire charges + chauffeur salary.
2,less : amount recovered from the employee
Not a perquisite(see note-1)





If car hp < 16, perquisite is Rs.400 600 p.m., if hp>16 Rs.600 900 p.m. with Rs.600  900 p.m.chauffeur salary.


Note :nothing is deductible in respect of any amount recovered from employee.


Note 1. Conditions to be satisfied if the Car is used for official purpose :-
  • The employer has maintained complete details of journey undertaken for offcial purpose which may include date of journey, destination, mileage, and the amount of exepnditure incurred thereon.
  • The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties
  • Content of log book - complete details of the journey such as date of journey destination, mileage and amount of the expenditure incurred.
  • The priciple of Arms length price will apply while cars taken from related parties.
Note:2: where more than one car is being provided for use for employee or member of his family then valuation will be as under
  • The only car will be valued as partly used for official purpose and partly for private purpose 
  • other car will be valued as fully used for private purpose.
Note:3-Car facility between residence to office
  • Car facility between office to residence and back is not chargeable to tax at all.
Note-4: Vehicle other than Car owned by employee and running and maintenance met /reimbursed by employer 
  • If used for official purpose: full exempt see note one
  • If used for private purpose: expense met by employer fully taxable as perquisites
  • Partly used for office: find out total expenses met by employer less 600 per month (or higher if actual recorded) for official purpose and less any amount recovered from employee balance amount will be treated as perquisite 
Note-5: if in any case given above the amount is negative after recovery from the employee then valuation of perquisites will be treated as nil



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  1. The profit realized on the sale of a non-inventory asset that was purchased at a lower price. Commonly they are realized from sale of stocks, bonds, precious metals and property.

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