Non taxable units of salary

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Roshini Arya (Querist)
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14 August 2015 Sir
Can car allowance be non taxable and if a person using his own car claim car allowance or is it only for leased cars.
What other non taxable components can be added for saving employee tax.

Rgds

Roshini

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 August 2015 Car allowance subject to limits is non taxable. For using own car allowance is exempted.

Roshini Arya

Roshini Arya (Querist)
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14 August 2015 Sir
Plz clarify
What are limits of exemption for car allowance to be non taxable.
Plz clarify if one is using his own car is the car allowance as a header in the salary structure exempted.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 August 2015 If the cubic capacity is 1600 or less Rs 1800 and if it is more Rs 2400 per month allowed as reimbursement of car expenses.

Roshini Arya

Roshini Arya (Querist)
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14 August 2015 Sir
Let me rephrase my query. If an employee is given a header in his salary as "Car Allowance" = Rs 20,000 per month then in such a case how is this component to be taxed if
a) He/she uses his/her own car for all purposes.

b) He/she uses a car that is the name of a
relative/friend and is leased to him/her.
(What would be extent of tax implication and to whom)

Thank you for your time and please clarify my doubt on the same.

Regards

Roshini

Amol S Joglekar

Amol S Joglekar (Expert)
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14 August 2015 Reasonableness is the CRUX.
If the employee is travelling/conveyancing for the purpose of COMPANY WORK/DUTY, the expenses are not taxable in the hands of employee.
Considering the petrol rate/diesel rate, average consumption... this 20,000 implies an average of 150 kms travel per day by the concerned employee.
You need to take the judgement call accordingly.

Roshini Arya

Roshini Arya (Querist)
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14 August 2015 Dear Amol ji
Thanks for your response.
But my query is different. Your query replies the concept of fuel reimbursement but not of car allowance.
Can you guide me specifically to Car allowance and in more details.

Thanks

Roshini

Amol S Joglekar

Amol S Joglekar (Expert)
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14 August 2015 For your query a), Seetharaman has already given the limits. They are based on the c.c. of the vehicle.

For query b), the rationale behind the provision, I tried to convey.
Thus to put it in short, if an employee is using LEASED car AND he/she is getting a car allowance of 20,000, the entire amount of 20,000 is taxable in the hands of employee.

Roshini Arya

Roshini Arya (Querist)
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14 August 2015 So even if the employee is using a leased car he will be taxed Rs 20000 unless he shows this as a lease amount paid for maintainence of lease.
Please guide as to how an employee can safe tax using car allowance and a leased car

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 August 2015 If he is using a leased car then it should be reimbursement of car expenses against bills which will be fully allowed. If it is paid as fixed car allowance the exemption is only 1800 per month as conveyance allowance.

Amol S Joglekar

Amol S Joglekar (Expert)
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17 August 2015 Never try to be Income tax centric. At the highest slab, it is asking for 30 out of 100.

There has to have a NEXUS between the job content of the employee and CAR.

Planning the TAX should be done in such a manner that it should NOT amount to DUBIOUS tax practice. The leased car is provided by company and the lease rental is paid by company directly looks like genuine transaction. The fact that Company pays to employee and employee , in turn pays the lease rent; itself is bit eyebrow raising. Be careful, please.

Roshini Arya

Roshini Arya (Querist)
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19 August 2015 The purpose is not to defraud the exchequer of the money due from a citizen.
The only purpose of my query is given an option to take a leased car on his/her behalf then should he/she be entitled to tax rebate.
As an organisation employees may not be very comfortable with the leasing rates and terms of conditions of the leasing company.

Keeping this mind I would request all the esteemed experts to suggest a way out such that is beneficial to the employee and does not contravene any laws of the land.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 August 2015 Company should lease out the vehicle/the employee lease the vehicle in the name of the company and make payment by the company at actual. Conveyance allowance of 1800 per month can be paid to employees.

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