Car Provided by the Employer: Perquisite Value Under Rule 15 (Tax Year 2026-27)
CA Meet Dhrangadhariya 
June 12, 2025
CA Meet Dhrangadhariya June 12, 2025
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Last updated: 06 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
A car given to you by your employer can be a tax-free business tool or a taxable perquisite, depending on how you use it. From Tax Year 2026-27 the values are in Rule 15(3), Table II of the Income-tax Rules, 2026. For FY 2025-26 the old Rule 3 figures apply (₹1,800 and ₹2,400 where the employer meets the costs, ₹600 and ₹900 where you do, and ₹900 for a driver).
| Situation | Car up to 1.6 litres, or electric vehicle | Car above 1.6 litres |
|---|---|---|
| Car owned or hired by the employer, used wholly and exclusively for official duties | No value, if the records below are kept | No value, if the records below are kept |
| Car owned or hired by the employer, used only for private use, running costs met by the employer | Actual expenditure on running and maintenance in the tax year, including the chauffeur’s pay, plus wear and tear, less what you pay | Same |
| Used partly for duty and partly for private use, running costs met or reimbursed by the employer | ₹5,000 (plus ₹3,000 if a chauffeur is provided) | ₹7,000 (plus ₹3,000 if a chauffeur is provided) |
| Used partly for duty and partly for private use, private running costs met by you | ₹2,000 (plus ₹3,000 if a chauffeur is provided) | ₹3,000 (plus ₹3,000 if a chauffeur is provided) |
Normal wear and tear is 10% a year of the cost of the car.
If you own the car and the employer meets or reimburses the running and maintenance costs (including a chauffeur):
For wholly official use, or to claim a higher official amount, two conditions apply:
If you can show that the official use costs more than the standard deduction in the table, the value is the actual amount the employer pays, less the higher official amount, on the same two conditions.
If the employer provides more than one car for your use or your household’s use, one car is valued at the mixed use rate and every other car at the private use rule, which is the actual expenditure plus wear and tear.
The cost of a vehicle used for your journey between home and the office is not a perquisite at all (section 17(2)(e) of the Act).
An employee gets a petrol car of 1.4 litres from the employer for office and personal use. The employer pays the fuel and a chauffeur’s pay.
| Item | Amount in ₹ |
|---|---|
| Value per month (₹5,000 plus ₹3,000 for the chauffeur) | 8,000 |
| Value for 12 months | 96,000 |
The ₹96,000 is added to salary. The employee’s tax on it is at the slab rate. If the same car were 1.8 litres, the monthly value would be ₹10,000. For an electric car the 1.6 litre column applies whatever the size.
Some employers offer a car lease deducted from your pay. The lease payment is not exempt just because it sits on the payslip. The car’s perquisite value is added to your salary under the table above, and what the employee gains depends on the tax slab, not on the label. Work out both sides before agreeing.
Only if it is used for private purposes. Used wholly and exclusively for official duties it has no value, if the employer keeps details of journeys and gives a certificate.
Per month, ₹5,000 (plus ₹3,000 if a chauffeur is provided) for a car up to 1.6 litres or an electric vehicle, and ₹7,000 (plus ₹3,000) for a bigger car, where the employer pays the running costs. If you pay them yourself, ₹2,000 or ₹3,000 (plus ₹3,000 for a chauffeur).
At the actual expenditure on running and maintenance in the year, including the chauffeur’s pay, plus 10% a year of the cost of the car for wear and tear, less any amount you pay.
One car is valued at the mixed use rate and each other car at the private use rule.
Yes. An electric vehicle is valued at the lower figure (the up to 1.6 litre column) whatever its power.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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