Increased Tax Outgo for Personal Use of Employer-Provided Vehicles

Salaried employees who utilize company-provided cars for both official and personal purposes are set to face a higher income tax burden. This change comes under the new Income Tax Rules, 2026, which were approved recently by Parliament and will take effect from April 1, 2026.

The revised rules introduce an upward adjustment in the valuation of perquisites associated with salary income, specifically targeting the personal use component of company vehicles. These changes will apply universally across both the old and new tax regimes, as they pertain to the valuation of benefits in kind received by employees.

Key Changes and Impact

• Higher Perquisite Valuation: The monetary thresholds and valuation norms for company cars used for mixed purposes have been revised upwards, aligning them with current economic conditions.
• Costlier for Employees: Experts note that the new rules make the use of an employer-provided car costlier for employees compared to the previous regulations.
• Potential Alternative: Conversely, employees using their own cars with employer reimbursement for running and maintenance expenses may find this option more economical under the new rules.

Employers and employees alike should review their compensation structures and perquisite policies to understand the full tax implications of these changes.