Reply..

Hi Divya,

Here's how to calculate the amount to be reduced by the employer from the actual car expenses for providing the car facility used partly for private purposes:

Given:

• Total expenses borne by employer in the year = Rs. 60,000

• Recovery from employee = Rs. 1,000 per month = Rs. 12,000 per year

• Car engine capacity = 1.8 litre (i.e., 1800 cc)

Relevant Rule (per Income Tax Act - Rule 3 of the Income Tax Rules):

For car with engine capacity > 1.6 liters and <= 2.0 liters where expenses are borne by employer, the value of perquisite (i.e., taxable benefit to employee) is:

• Actual expenditure incurred by employer - amount recovered from employee

So,

• Total expenses = Rs. 60,000

• Less recovery from employee = Rs. 12,000

• Amount to be reduced = Rs. 12,000 (the recovery from employee)

Thus, the employer should reduce Rs. 12,000 from the actual expenditure of Rs. 60,000, and the net taxable perquisite value will be Rs. 48,000.

Summary: