Company Car Lease under New Tax Regime

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Under the new tax regime, company car lease benefits may become taxable depending on ownership, lease structure, and reimbursement terms. Tax treatment differs from the old regime, and employee-paid fuel or maintenance may not always remain tax-free.

Nilesh Ladha

Nilesh Ladha (Querist)

05 April 2023 Is there any change in Company Car Lease benefits under new tax regime?Car is registered in company’s name and fuel/maintenance bills are paid by employee.In old regime,both monthly lease amount and the fuel/maintenance reimbursed to employee were non taxable.

CA Sanat Pyne

CA Sanat Pyne (Expert)

05 April 2023 Yes, there have been changes in the tax treatment of company car lease benefits under the new tax regime in India, which came into effect from April 1, 2021.

Under the new tax regime, the tax treatment of car lease benefits depends on whether the car is owned or leased by the employer. If the car is owned by the employer and used for business purposes, the expenses incurred by the employer on the car will be allowed as a deduction for tax purposes. However, if the car is owned by the employee and leased to the employer, the tax treatment will depend on the amount of lease rental paid by the employer.

If the lease rental paid by the employer is less than Rs. 50,000 per month, the entire amount of the lease rental and the expenses incurred on the car will be considered as a taxable perquisite in the hands of the employee. However, if the lease rental paid by the employer is more than Rs. 50,000 per month, the tax treatment will depend on the ownership of the car.

If the car is owned by the employer and leased to the employee, the employee will be required to pay tax on the entire amount of the lease rental and the expenses incurred on the car. However, if the car is owned by the employee and leased to the employer, the tax treatment will depend on the ownership of the fuel/maintenance bills.

If the fuel/maintenance bills are paid by the employee, and the lease rental paid by the employer is less than Rs. 50,000 per month, the entire amount of the lease rental and the expenses incurred on the car will be considered as a taxable perquisite in the hands of the employee. However, if the lease rental paid by the employer is more than Rs. 50,000 per month, the employee will be required to pay tax on the entire amount of the lease rental and the expenses incurred on the car, regardless of whether the fuel/maintenance bills are paid by the employee or the employer.

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