Urgent Clarification of FBT required ?
This query is : Resolved
12 December 2008
Sir,
I am confused. Yesterday i got two opinion stating Driver's salary should be included in vehicle running & maint exp.
Please refer to "CIRCULAR No. 8/2005, dt 29/8/05 of Fin Act, 2005.
Point No. 78
Reimbursement in respect of car exp on the basis of bills submitted & driver's salary on the basis of declaration :
such reimbursement is effectively exp of employers for the purpose ofconveyance, tour & travel covered in clause (F). SO IT IS A CONVEYANCE EXP.
Point No. 87
Salary paid to driver of a motor car :
is a vehicle running & maint exp.
THE ABOVE TWO POINTS ARE CONTRADICTORY.
CAN U URGENTLY CLARIFY.
WHAT IS THE CORRECT TREATMENT?
Thanks
Subhash
I am confused. Yesterday i got two opinion stating Driver's salary should be included in vehicle running & maint exp.
Please refer to "CIRCULAR No. 8/2005, dt 29/8/05 of Fin Act, 2005.
Point No. 78
Reimbursement in respect of car exp on the basis of bills submitted & driver's salary on the basis of declaration :
such reimbursement is effectively exp of employers for the purpose ofconveyance, tour & travel covered in clause (F). SO IT IS A CONVEYANCE EXP.
Point No. 87
Salary paid to driver of a motor car :
is a vehicle running & maint exp.
THE ABOVE TWO POINTS ARE CONTRADICTORY.
CAN U URGENTLY CLARIFY.
WHAT IS THE CORRECT TREATMENT?
Thanks
Subhash
12 December 2008
Please read this as:
When there is reimbursement of conveyance expenses then it is clear that the vehicle is not owned by the employer. So here is salary paid to driver by the employee.
On the other hand "Salary paid to the driver of a motor car - is a vehicle running & maintt. expenses" means that vehicle is owned by the employer and driver is also his employee.
When there is reimbursement of conveyance expenses then it is clear that the vehicle is not owned by the employer. So here is salary paid to driver by the employee.
On the other hand "Salary paid to the driver of a motor car - is a vehicle running & maintt. expenses" means that vehicle is owned by the employer and driver is also his employee.
12 December 2008
Now I think you can make difference between the two.
15 December 2008
But Sir,
In our case, the vehicle is owned by the employer & employee is using it for office purposes.
Employee is using his personal driver for this & claiming reimbursement from the employer for the driver's salary.
Now tell me how should i take it.
Thanks & Regards,
Subhash Jha
In our case, the vehicle is owned by the employer & employee is using it for office purposes.
Employee is using his personal driver for this & claiming reimbursement from the employer for the driver's salary.
Now tell me how should i take it.
Thanks & Regards,
Subhash Jha
02 August 2025
Got it, Subhash — here’s a clear explanation to resolve the confusion about **treatment of driver’s salary for FBT (Fringe Benefit Tax) purposes**, especially in your case where:
* Vehicle is **owned by the employer**,
* Employee uses his **personal driver**,
* Employee claims **reimbursement of driver’s salary** from the employer.
---
### Key points from Circular No. 8/2005:
* **Point 78:**
If the employer reimburses the employee for **car expenses based on bills submitted** and also reimburses **driver’s salary based on declaration**, it is considered **conveyance expense reimbursed** to the employee.
**(Vehicle NOT owned by employer)**
* **Point 87:**
Salary paid to the **driver employed by the employer** is treated as **vehicle running & maintenance expense**.
**(Vehicle owned by employer)**
---
### What does this mean for your situation?
| Situation | Treatment of Driver’s Salary |
| --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |
| Vehicle **owned by employer** + driver is **employer’s employee** | Driver’s salary is vehicle running & maintenance expense (employer’s cost). Subject to FBT as conveyance. |
| Vehicle **NOT owned by employer** + reimbursement to employee for driver’s salary | Driver’s salary reimbursement is part of conveyance reimbursement to employee, treated differently under FBT. |
---
### Your case:
* Vehicle **owned by employer** (Company owns the vehicle).
* Employee uses **his personal driver** (driver is employee of the employee, not employer).
* Employee claims **reimbursement of driver’s salary** from employer.
**Treatment:**
* Since vehicle is owned by employer, driver salary should ideally be paid by the employer if the driver is employer’s employee.
* Here, employer reimbursing the employee for driver salary means it is a **conveyance expense reimbursement to employee**.
* This falls under the category of **conveyance benefit to employee**, so driver’s salary reimbursement is treated as **perquisite**, and subject to **FBT on conveyance**.
---
### Summary for your case:
* Employer reimbursing employee for personal driver’s salary who drives employer-owned vehicle = **treated as conveyance perquisite**.
* The reimbursement amount is **liable for FBT under conveyance category**.
* Driver’s salary is **not vehicle running expense of employer** but a reimbursement benefit to employee.
---
### Actionable advice:
* Maintain clear records of reimbursement.
* Include reimbursed driver’s salary in **conveyance FBT calculations**.
* Do not treat it as vehicle running & maintenance expense on employer’s books.
---
If you want, I can help you draft the FBT calculation sheet or prepare a note to explain this treatment for your records or audit. Would you like that?
* Vehicle is **owned by the employer**,
* Employee uses his **personal driver**,
* Employee claims **reimbursement of driver’s salary** from the employer.
---
### Key points from Circular No. 8/2005:
* **Point 78:**
If the employer reimburses the employee for **car expenses based on bills submitted** and also reimburses **driver’s salary based on declaration**, it is considered **conveyance expense reimbursed** to the employee.
**(Vehicle NOT owned by employer)**
* **Point 87:**
Salary paid to the **driver employed by the employer** is treated as **vehicle running & maintenance expense**.
**(Vehicle owned by employer)**
---
### What does this mean for your situation?
| Situation | Treatment of Driver’s Salary |
| --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |
| Vehicle **owned by employer** + driver is **employer’s employee** | Driver’s salary is vehicle running & maintenance expense (employer’s cost). Subject to FBT as conveyance. |
| Vehicle **NOT owned by employer** + reimbursement to employee for driver’s salary | Driver’s salary reimbursement is part of conveyance reimbursement to employee, treated differently under FBT. |
---
### Your case:
* Vehicle **owned by employer** (Company owns the vehicle).
* Employee uses **his personal driver** (driver is employee of the employee, not employer).
* Employee claims **reimbursement of driver’s salary** from employer.
**Treatment:**
* Since vehicle is owned by employer, driver salary should ideally be paid by the employer if the driver is employer’s employee.
* Here, employer reimbursing the employee for driver salary means it is a **conveyance expense reimbursement to employee**.
* This falls under the category of **conveyance benefit to employee**, so driver’s salary reimbursement is treated as **perquisite**, and subject to **FBT on conveyance**.
---
### Summary for your case:
* Employer reimbursing employee for personal driver’s salary who drives employer-owned vehicle = **treated as conveyance perquisite**.
* The reimbursement amount is **liable for FBT under conveyance category**.
* Driver’s salary is **not vehicle running expense of employer** but a reimbursement benefit to employee.
---
### Actionable advice:
* Maintain clear records of reimbursement.
* Include reimbursed driver’s salary in **conveyance FBT calculations**.
* Do not treat it as vehicle running & maintenance expense on employer’s books.
---
If you want, I can help you draft the FBT calculation sheet or prepare a note to explain this treatment for your records or audit. Would you like that?
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