Claiming exemption of perquisite for employee-owned car under New Tax Regime in ITR-2

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Under the new tax regime, reimbursements for fuel and driver expenses for an employee-owned car used exclusively for official purposes can still be claimed as an exempt perquisite. While ITR-2 doesn't have a specific exemption row for this, you must accurately report the salary and perquisite details in Schedule S, ensuring the taxable amount reflects the official use exemption. Maintain thorough documentation like logbooks and bills to support your claim.

Debasis Mukhopadhyay

Debasis Mukhopadhyay (Querist)

13 July 2026 Issue: A salaried employee is getting reimbursement of Fuel/driver expenses etc as part of his salary against his own car. So far in old regime, he can claim the exemption u/s 17(2 of Rs. 32,400/- for his small car. However, while switching to new regime this year, he is unable to claim the same in ITR-2, though the Form captures the perquisite amount under the Income Head- Salary properly. My query is -

1) Is this exemption u/s17(2) is still available under New Tax Regime ?
2) And if so, how can this be claimed in ITR-2?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

13 July 2026 Section 115BAC restricts many Chapter VI-A deductions and several exemptions, but the Department’s salary guidance for AY 2026-27 still recognizes exempt salary allowances and certain perquisites even under the current framework, and standard deduction is separately shown as available under the new regime. For employee-owned cars, the guidance specifically says reimbursement for use of the vehicle wholly and exclusively for official purposes is fully exempt subject to maintenance of specified documents.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

13 July 2026 if your employer is actually paying you for fuel/driver expenses against your own car:

If it is for official use only and properly supported, it can be treated as not taxable / exempt perquisite under the car-perquisite rules.

If it is for mixed or personal use, the reimbursement becomes taxable to the extent prescribed under the motor-car perquisite rules.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

13 July 2026 In ITR-2, you generally do not “claim a separate exemption under section 17(2)” in a special deduction row. Instead, you must ensure the salary/perquisite breakup is entered correctly in Schedule S:

Enter salary under section 17(1).

Enter the perquisite amount under “Value of perquisites as per section 17(2)”.

Choose the appropriate perquisite type, such as “Cars / Other Automotive”.

If your employer’s Form 16/Form 12BA has already treated the amount as taxable perquisite, but you believe it should be exempt because it is official-use reimbursement with supporting logs/bills, then the practical way in ITR-2 is to report the salary details as per the actual taxability in Schedule S, not merely as shown in Form 16. If the portal is not allowing an adjustment, that usually means the return utility expects the employer to have reported it correctly or the item is being captured only as a perquisite value, not as a separate exemption line.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

13 July 2026 Ask the employer/payroll to reflect it correctly in Form 16 / salary statement if the reimbursement is exempt for official use only.

In ITR-2, enter it under Schedule S → perquisites → Cars / Other Automotive and ensure the taxable amount is correct.

Keep supporting documents: car logbook, duty-purpose details, fuel bills, driver bills, and employer policy/approval, because the exemption is conditional on records.

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