What is car allowance??
Motor car allowance. The taxable value of the perquisite is not related to the amount actually spent by the employer on acquiring, or providing, and maintaining the car. Let us assume, for example that the company you work for has acquired a car on a hire purchase basis, and is paying a monthly instalment of Rs.8,000, Rs.3,000 to a driver, and spends Rs.5,000 on fuel, and an average of Rs.1,000 on taxes, insurance and maintenance, per month. Thus, though your company spends Rs.17,000 per month for providing you the car, the taxable perquisite value in your hands would be only Rs.1,100 per month – a reduction of Rs.15,900 per month from your taxable income.
