TDS liabilty of the emplyer on Driver reimbursement
This query is : Resolved
27 March 2010
Dear All
If the driver salary is reimbursed to the officers of High rank, whether it would be wholly, exempt from tax. IF
Car is owned by the employee
Driver is exclusively used for the official purposes.
Records of Driver use are maintained in this regard.
Some Labour Advocate opined that as the driver is exclusively used for the official purposes. It would attract ESI, PF also.
Pls all should comment or think about it .
It is very important as a tax planning tool.
Thanx in advance
If the driver salary is reimbursed to the officers of High rank, whether it would be wholly, exempt from tax. IF
Car is owned by the employee
Driver is exclusively used for the official purposes.
Records of Driver use are maintained in this regard.
Some Labour Advocate opined that as the driver is exclusively used for the official purposes. It would attract ESI, PF also.
Pls all should comment or think about it .
It is very important as a tax planning tool.
Thanx in advance
28 March 2010
If the car is owned by the employee and used fully for offical purpose - driver salary not taxable
If the car is used fully personal- fully taxable
If the part office and part personal- the actual salary less Rs.600 p.m is taxable
If the car is used fully personal- fully taxable
If the part office and part personal- the actual salary less Rs.600 p.m is taxable
28 March 2010
Dear Ramesh
What about PF / ESI obligations for driver, as he is fully used for the office
What about PF / ESI obligations for driver, as he is fully used for the office
27 July 2025
Here’s a detailed breakdown regarding **TDS liability and other statutory obligations** on driver salary reimbursement by an employer to high-ranking officers:
---
### Situation:
* Driver’s salary is reimbursed to employees (officers) who own the car.
* Driver is exclusively used for official purposes.
* Records of driver’s official use are maintained.
* Query covers TDS, taxability, and also PF/ESI applicability.
---
### 1. **TDS and Income Tax Treatment:**
* **If the car is owned by the employee** and the driver is *exclusively* used for official purposes, then the **driver’s salary reimbursement is generally not taxable in the hands of the employee**, as it is a genuine official expense.
* If the driver is used partly for personal use, then the amount taxable will be **actual reimbursement minus Rs. 600 per month** (as per CBDT rulings).
* So, **TDS on this reimbursement by the employer is generally not applicable** because it is not considered income of the employee.
---
### 2. **PF / ESI Applicability:**
* The driver is an employee of the officer or employer? Usually, the driver is employed by the officer or a third party.
* If the driver is employed by the **employee (officer)** and salary is reimbursed, then **PF and ESI obligations rest on the employer of the driver** (which is the officer, not the company).
* If the driver is employed by the **company**, then PF/ESI will apply as usual.
* Since driver is used exclusively for official purposes, **ESI and PF liability will apply if the driver is an employee under the company or officer** and salary exceeds the threshold limits.
---
### 3. **Labour Law Perspective:**
* Labour Advocate’s view: Since the driver is exclusively used for official purposes, the salary paid is a business expense and would attract PF/ESI contributions as per relevant laws if applicable.
* So, from a **statutory compliance standpoint, the officer employing the driver should comply with PF and ESI rules**, if the driver is an employee and wages meet the limits.
---
### Summary:
| Aspect | Explanation |
| ------------------------------- | -------------------------------------------------------------------------------------------- |
| **TDS on driver reimbursement** | Not applicable if reimbursement is genuine and driver used exclusively for official purposes |
| **Income tax on reimbursement** | Exempt if driver’s service is fully for official use; partially taxable if mixed use |
| **PF/ESI applicability** | Applicable to driver’s employer (officer or company); salary threshold conditions apply |
| **Tax planning** | Maintain records of driver’s official use to justify exemption |
---
### Recommendations:
* Maintain detailed logs of driver’s official use.
* If driver is employee of the officer, ensure compliance with PF/ESI rules.
* The company/employer need not deduct TDS on reimbursements for driver salary if genuinely for official use.
---
If you want, I can also help you draft a formal note or policy around this for your organization. Would that help?
---
### Situation:
* Driver’s salary is reimbursed to employees (officers) who own the car.
* Driver is exclusively used for official purposes.
* Records of driver’s official use are maintained.
* Query covers TDS, taxability, and also PF/ESI applicability.
---
### 1. **TDS and Income Tax Treatment:**
* **If the car is owned by the employee** and the driver is *exclusively* used for official purposes, then the **driver’s salary reimbursement is generally not taxable in the hands of the employee**, as it is a genuine official expense.
* If the driver is used partly for personal use, then the amount taxable will be **actual reimbursement minus Rs. 600 per month** (as per CBDT rulings).
* So, **TDS on this reimbursement by the employer is generally not applicable** because it is not considered income of the employee.
---
### 2. **PF / ESI Applicability:**
* The driver is an employee of the officer or employer? Usually, the driver is employed by the officer or a third party.
* If the driver is employed by the **employee (officer)** and salary is reimbursed, then **PF and ESI obligations rest on the employer of the driver** (which is the officer, not the company).
* If the driver is employed by the **company**, then PF/ESI will apply as usual.
* Since driver is used exclusively for official purposes, **ESI and PF liability will apply if the driver is an employee under the company or officer** and salary exceeds the threshold limits.
---
### 3. **Labour Law Perspective:**
* Labour Advocate’s view: Since the driver is exclusively used for official purposes, the salary paid is a business expense and would attract PF/ESI contributions as per relevant laws if applicable.
* So, from a **statutory compliance standpoint, the officer employing the driver should comply with PF and ESI rules**, if the driver is an employee and wages meet the limits.
---
### Summary:
| Aspect | Explanation |
| ------------------------------- | -------------------------------------------------------------------------------------------- |
| **TDS on driver reimbursement** | Not applicable if reimbursement is genuine and driver used exclusively for official purposes |
| **Income tax on reimbursement** | Exempt if driver’s service is fully for official use; partially taxable if mixed use |
| **PF/ESI applicability** | Applicable to driver’s employer (officer or company); salary threshold conditions apply |
| **Tax planning** | Maintain records of driver’s official use to justify exemption |
---
### Recommendations:
* Maintain detailed logs of driver’s official use.
* If driver is employee of the officer, ensure compliance with PF/ESI rules.
* The company/employer need not deduct TDS on reimbursements for driver salary if genuinely for official use.
---
If you want, I can also help you draft a formal note or policy around this for your organization. Would that help?
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