Company Leased Car

Company Leased Car

Company Leased Car means leasing company will buy a car for the employee and give it to an employee for official and personal use. The car will be in the name of a leasing company and the employee just need to pay a monthly lease amount which is even lower than EMI.

It is commonly offered by dealers as an alternative to car purchase but is widely used by businesses as a way to obtain (or use) vehicles for business, without commonly on required cash outlay. 

The Benefit Of a Company Leased Car To An Employee?

  • Yes, Company leased car is beneficial.
  • Corporate leasing usually follows the operating lease model for which you must either return the car to the lessee or purchase it at the prevailing market price at the end of the lease term. 
  • The finance lease model transfers ownership of the car to your name at the end of the term

Tax Benefits On A Car Provided by the Employer

1. Car owned by the employer – Value of car used exclusively for official purposes

Regardless of who owns the car, if the car given by the employer is utilized exclusively for official purposes, no tax liability exists. For this to be non-taxable, the employer should keep up appropriate records as given beneath- 

  • Details of all the official journeys should be kept up including details like date, destination, mileage, bills, and different consumptions identified with it. 
  • The employer should likewise issue a certificate stating that the vehicle was utilized uniquely for official purposes. 

Also, read | Medical Allowance 

2. Car owned by the employer – Value of car used for both official and personal purposes

At the point when the car provided by the employer is utilized for personal purposes instead of official ones, the consumption will be considered under Rule 3(2)(A) and Table II of Value of Perquisites. The table beneath gives additional information on the same-

Description Cubic Capacity within 1.6 liter Cubic Capacity exceeding 1.6 liter
Expenses reimbursed by the employer Rs.1,800 + Rs.900 (if a driver is provided by the employer) Rs.2,400 + Rs.900 (if the driver is provided by the employer)
Expenses directly met by the employee Rs.600 + Rs.900 (if the driver is provided by the employer) Rs.900 + Rs.900 (if the driver is provided by the employer)

Source- Clear Tax

3. Car owned by the employer – Value of car used only for Personal Purposes

  • On the off chance that the car provided by the employer is exclusively utilized for personal reasons and if the use is borne by the employer totally, the whole amount will be taxable. 
  • No advantage on company leased car can be benefited by the employee in such a manner. 
  • The sum repaid will be referenced in the payslip and can be taxed according to the income tax slab. Any amount recovered by the employer from the employee will be decreased in figuring the taxable amount. 

4. Car owned by the employee

For a situation where the car is claimed by the employee and running and maintenance, expenses are met or reimbursed by the employer.

  • The car is utilized completely for true purposes, the estimation of the car would be like point (1) above. 
  • The car is utilized for personal purposes instead of official ones, the expenditure incurred as reduced by below will be taxable:
Description Cubic Capacity within 1.6 liter Cubic Capacity exceeding 1.6 liter
Expenses reimbursed by the employer Rs.1,800 + Rs.900 (if a driver is provided by the employer) Rs.2,400 + Rs.900 (if the driver is provided by the employer)
Expenses directly met by the employee Rs.600 + Rs.900 (if the driver is provided by the employer) Rs.900 + Rs.900 (if the driver is provided by the employer)

Source- Clear Tax

Illustration to show which option is beneficial for the employee 

  • Consider that Leela Associates Ltd. has taken a car for rent and gave it to the new director. 
  • This company leased car is allowed by the employer to be utilized both for individual and official purposes. 
  • The driver doesn’t give a driver to this vehicle. Let’s assume that the vehicle’s cubic limit is above 1.6 liters. 
  • For this situation, the estimation of perquisites will be Rs.2,400 each month. 
  • For example, Rs.28,800 per annum. Rs.900 is excluded here as the employer has not given a driver to the vehicle according to the statement given above. 
  • Indeed, even for a situation where the employer provides the manager with Rs.1 lakh as repayment, the estimation of the prerequisite taxable would be Rs.32,400 and Rs.39,600. 
  • The contrast between the estimation of perquisites and the repayment won’t be available for him. 

5. What occurs if the Employer gives multiple Cars? 

  • On the off chance that your employer gives one car for your use and another vehicle for your family members use the advantages from the estimation of perquisites will be applicable to just a single car. 
  • The other car will be considered exclusively for personal purposes and won’t be qualified for any tax benefits.

GST On Company Leased Car

Leases of vehicles purchased and leased before 1 July 2017 will attract GST at a rate equal to 65% of the applicable GST rate (including compensation cess).

 

Nikita Dhyani

Nikita Dhyani is a Content Writer at Ionic Digitech. A passionate content writer and has been using her content writing skills to develop various content related to financial and business-related topics. She has done BAJMC (Bachelors in media and mass communication and journalism) from Graphic Era University. Her specialties include - Content creation, Content development, Media managing, Communications skills.

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