Car Fuel & Maintenance query

When an employee owns the car and uses it for both official and personal purposes without any reimbursement from the employer, the employee can not claim a specific exemption for car fuel and maintenance expenses in the Income Tax Return (ITR) for the portion used for official purposes under normal circumstances. 

However, if the employer provides a conveyance allowance for using the car for official duties, this allowance is taxable. But if there is no reimbursement or allowance specifically for fuel and maintenace for official use, and the car is owner by the employee , generlly no exemption can be claimed for these expenses in ITR for official use. You can refer further details in Section 37 of the Income - tax act. 

Car fuel and maintenance reimbursement:

• If the employee owns the car and the employer reimburses fuel and maintenance for mixed (official and personal) use, the taxable perquisite is the reimbursement minus a fixed amount for official use under Rule 3(2) (revised upward in 2024, with a separate amount for a driver).

• If wholly for official use with log books, the reimbursement isn't taxable.

No exemption can be claimed in the employee’s ITR for fuel or maintenance costs paid personally when the employer has not reimbursed them or provided a corresponding allowance. Merely using an employee-owned car partly for office travel does not make those expenses deductible from salary income.

If the employer pays a car-related allowance, any exemption depends on the applicable salary-perquisite rules and the nature of the arrangement; it is not a claim for the employee’s actual unreimbursed costs in the ITR. On the facts stated, the amount claimable is nil.

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