## Valuation of Motor Car Perquisite [Rule 3(2)]

The value depends on who owns the car, who meets the expenses, and the purpose of use (official / personal / both). 'Month' always means calendar month.

### A. Car owned by EMPLOYER

Expenses met by	Use	Perquisite value
Employer	Only official	Nil (records must be maintained)
Employer	Only personal	Own car: 10% p.a. of original cost; Rented: actual rent; plus actual running expenses
Employer	Both official & personal	≤ 1.6 litre: ₹1,800 p.m.; > 1.6 litre: ₹2,400 p.m. (+ ₹900 p.m. if chauffeur provided)
Employee	Both official & personal	≤ 1.6 litre: ₹600 p.m.; > 1.6 litre: ₹900 p.m. (+ ₹900 p.m. if chauffeur provided)

### B. Car owned by EMPLOYEE, expenses met by EMPLOYER

Use	Perquisite value
Only official	Nil (records must be maintained)
Only personal	Running expenses reimbursed by employer (fully taxable)
Both official & personal	Actual expenses reimbursed − deemed official value [₹1,800 p.m. (≤1.6L) or ₹2,400 p.m. (>1.6L)] + ₹900 p.m. for driver if provided. To claim a higher official deduction, employer must maintain additional records and issue a certificate.

### Key rules to remember

✓ Motor car provided by employer is taxable only for specified employees (it falls in the specified-employee perquisite list). But if the employee owns the car and the employer reimburses running/maintenance for personal use, it is taxable for ALL employees.
✓ Residence-to-office travel in an employer-provided vehicle is not a perquisite (not taxable).
✓ Any amount recovered from the employee is deducted from the gross perquisite value.
✓ Part of a month counts as a full month ('per month or part of a month').

### Multiple cars

If more than one car (owned/hired by employer) is provided for personal & official use:

One car → valued on the official-and-personal basis above.
Additional cars → valued as if used exclusively for personal purposes.

### Other vehicles (not a car)

Where the employee owns a vehicle other than a car, expenses are met by the employer, and it is used for both official and personal purposes:

Perquisite = Actual expenses incurred by employer − ₹900 p.m.

Worked example

### Example 1

Employer car, both uses, 1.4L, with chauffeur (full year): Perquisite = (₹1,800 + ₹900) × 12 = ₹32,400. Engine ≤ 1.6L so ₹1,800 p.m. applies, plus ₹900 p.m. for the chauffeur.

### Example 2

Employee-owned car, employer meets expenses, both uses, 1.8L engine, actual reimbursement ₹1,00,000, no driver: Perquisite = ₹1,00,000 − (₹2,400 × 12) = ₹1,00,000 − ₹28,800 = ₹71,200 (assuming no extra records justifying higher official deduction).

### Example 3

Two cars provided (both employer-owned, both uses): Car 1 valued on official-and-personal basis (e.g., ₹2,400 p.m. for >1.6L); Car 2 valued as if used wholly for personal use (10% p.a. of cost + running expenses).

⚠️ Common exam mistakes

Treating residence-to-office travel as a taxable perquisite — it is specifically excluded.
Forgetting that employer-provided car is taxable only for specified employees, but reimbursement of an employee-owned car's expenses is taxable for ALL employees.
Prorating a part-month — any part of a month is counted as a full month.
Omitting the ₹900 p.m. chauffeur addition, or wrongly applying engine-capacity slabs (₹1,800 vs ₹2,400; ₹600 vs ₹900).
Valuing additional cars on the both-use basis instead of exclusively-personal basis.
Not deducting amounts recovered from the employee.

Reference: Rule 3(2) — Income-tax Rules

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Valuation of Motor Car perquisite [Rule 3(2)]

Worked example

⚠️ Common exam mistakes