April 12, 2026 in India — Company car tax benefits in India involve both employer and employee tax implications. Understanding perquisite rules for employer-provided vehicles helps both companies and employees plan their tax positions.
This guide covers all tax aspects of company-provided cars in India.
Company Car Perquisite Rules
When an employer provides a car, it becomes a taxable perquisite for the employee:
- Value of perquisite: Added to employee's income
- Tax rate: Employee's applicable slab rate
- Driver provided: Additional perquisite value
Perquisite Value Calculation
Car Provided for Personal Use
When car is available for personal use (even if used for office too):
| Engine Capacity | Monthly Value |
|---|---|
| Below 1.6L | Rs 1,800/month |
| Above 1.6L | Rs 2,400/month |
Car Provided Exclusively for Business
If employee certifies car is used only for office duties:
- No perquisite value: When purely business use
- Documentation: Self-declaration required
- Office purpose: Not for commuting
GST on Company Cars
Companies can claim input tax credit on company cars:
- GST paid: Full credit available
- Business use: ITC proportional to business usage
- Records: Maintain vehicle usage log
Employee Tax Implications
| Scenario | Perquisite Value | Tax Impact |
|---|---|---|
| Car for personal use | Rs 1,800-2,400/month | Added to income |
| Car for office only | Nil (certified) | No additional tax |
| Driver provided | Rs 900/month | Added to income |
| Fuel for personal use | Fuel cost | Added to income |
Running Cost Reimbursement
Companies may reimburse vehicle running costs:
- Fuel reimbursement: Actual expenses
- Driver salary: Part of cost-to-company
- Maintenance: Company bears cost
- Tax treatment: Perquisite rules apply
Company Car Depreciation
Companies can claim depreciation on company cars:
- Rate: 25% WDV for commercial vehicles
- 15% for cars: Personal-use company cars
- Full ITC: GST credit on purchase
Salary Sacrifice: Car Lease
Salary sacrifice arrangements for cars:
- Employee opts: Lower salary for car benefit
- Tax efficient: Perquisite value may be lower
- EMI savings: Company handles financing
Employee vs Employer Benefits
| Aspect | Company Car | Car Allowance |
|---|---|---|
| Tax for employee | Perquisite value added | Fully taxable salary | GST benefit | Company claims ITC | No ITC |
| Flexibility | Limited to company car | Choose own vehicle |
Frequently Asked Questions
How is company car perquisite value calculated?
Perquisite value for company cars is Rs 1,800/month for cars below 1.6L engine and Rs 2,400/month for larger cars, added to employee's taxable income.
Is GST input tax credit available on company cars?
Yes, companies can claim GST ITC on company cars used for business. Proper documentation of business usage percentage is required.
Can an employee avoid perquisite tax on company car?
If an employee certifies the car is used exclusively for office purposes (not for commuting), no perquisite value is added to income.
What is the tax treatment of fuel provided for personal use?
When fuel is provided for personal use, its cost is added to perquisite value. This is significant additional tax for high-usage employees.
Conclusion
Company cars have specific tax rules for both employer and employee. Understanding perquisite values helps in salary negotiation. Use our company car calculator to compare options.
Disclaimer: This article is for informational purposes only. Tax rules for company cars are complex. Consult a tax professional.
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