## Valuation of Motor Car Perquisite [Rule 3(2)]
When an employer provides a motor car to an employee, whether it creates a taxable perquisite — and how much — depends on three questions:
1. Who owns the car? (Employer or Employee)
2. Who meets the running/maintenance expenses? (Employer or Employee)
3. For what purpose is it used? (Only official / Only personal / Both)
### Key threshold
The valuation splits on engine capacity: up to 1.6 litres (cubic capacity) vs more than 1.6 litres. A chauffeur, if provided, adds a flat ₹900 p.m.
### Case 1 — Car owned by Employer, expenses met by Employer
| Use | Gross Perquisite Value |
|---|---|
| Only official | Nil (records must be maintained) |
| Only personal | Actual cost to employer = 10% p.a. of original cost (own car) or actual rent (hired) + actual running expenses |
| Both official & personal — up to 1.6L | ₹1,800 p.m. (+₹900 p.m. if chauffeur) |
| Both official & personal — above 1.6L | ₹2,400 p.m. (+₹900 p.m. if chauffeur) |
### Case 2 — Car owned by Employer, expenses met by Employee
| Use (both official & personal) | Gross Perquisite Value |
|---|---|
| Up to 1.6L | ₹600 p.m. (+₹900 p.m. if chauffeur) |
| Above 1.6L | ₹900 p.m. (+₹900 p.m. if chauffeur) |
### Case 3 — Car owned by Employee, expenses met by Employer
| Use | Gross Perquisite Value |
|---|---|
| Only official | Nil (records must be maintained) |
| Only personal | Running expenses reimbursed by employer (taxable for ALL employees) |
| Both personal & official | Actual expenses reimbursed minus deemed official value (₹1,800 p.m. up to 1.6L / ₹2,400 p.m. above 1.6L) minus ₹900 p.m. if driver provided |
> For higher deduction of official expenses in Case 3, the employer must maintain additional records and issue a certificate.
### Important rules to remember
- 'Month' = calendar month, and value is charged for a month or part of a month.
- A car provided by the employer is taxable only for specified employees (Cases 1 & 2).
- Reimbursement of running/maintenance of an employee-owned car used personally is taxable in the hands of ALL employees.
- Residence-to-office travel in an employer-provided vehicle is NOT a perquisite.
- Any amount recovered from the employee is deducted from the gross perquisite value.
### More than one car
- First car: valued as 'both official and personal'.
- Each additional car: valued as exclusively for personal use.
### Other vehicle (not a car)
Where the employee owns a non-car vehicle, expenses are met by the employer, and it is used for both purposes:
> Perquisite = Actual expenses incurred by employer − ₹900 p.m.