Income Tax Exemption on Car Allowances
Organization gives car expenses repayment to its workers if these costs are brought about for official obligations. When the car is owned by the employee, then income tax liability obligation claimed by the employee is focused around the reason for use: private, official or both. Undermentioned points will help us comprehend taxability of car expenses reimbursements, when the employee owns the car and the costs are repaid or borne by the Company.
1. If that vehicle costs are repaid or borne by the company and the vehicle is utilized singularly for official reason then such repayments won't be liable to Income tax. Below mentioned conditions must fulfill to claim these costs:
employer ought to keep up legitimate records of journey, mileage, end and the measure of consumption.
employer gives an endorsement that the costs repaid are for entirely and solely for official utilization.
2. If that car is utilized completely for private reason then whole repayments paid are assessable.
3. If the car is utilized for both private and official reason, then assessable sum is ascertained on the premise of the accompanying equation.
total sum used or repaid by the employer.
less: Amount utilized for official reason that is detailed by Income Tax Act on the premise of cubic capacity*
less: Any sum recuperated from employee.
balance sum, if positive, is assessable to the employee.
* Value utilized for official intention is figured on the premise of cubic limit of a car.
In the event that cubic limit of the car is underneath 1.6 liters i.e. 1600 cc, costs for utilization of the car are considered at the rate of Rs. 1,800/ - p.m.
In the event that cubic limit of the car is over 1.6 liters i.e. 1600 cc, costs for utilization of the car are considered at the rate of Rs. 2,400/ - p.m.
In the event that driver is given by employer then the costs asserted are limited to Rs. 900/ - p.m. higher amount is admissible if payment proof elements like bank passbooks, payment vouchers and so on are accessible with the employer.