Car perquisite calculation 2026: How tax may increase on ₹20 lakh, ₹30 lakh and ₹50 lakh salaries

The draft Income-tax Rules 2026 have proposed significant changes to the taxable perquisite value of motor cars used by employees partly for official and partly for personal purposes. These draft rules may be implemented from April 1, 2026 if passed without any amendments. This article explains the proposed changes and how they may impact an employee's tax liability, along with calculations.

First, let us understand the proposed changes.

The key changes in the valuation of motor car perquisites for taxation proposed in the draft rules can be broadly divided into three situations:

Situation 1

If the cubic capacity of the engine is less than 1.6 litres, the taxable value of the perquisite is proposed to be ₹5000/month (plus ₹3000/month if a chauffeur is also provided). Previously, the taxable value in this situation was ₹1800 per month (plus ₹900 per month for a chauffeur).

If the cubic capacity is more than 1.6 litres, then the taxable value of the perquisite will be ₹7000 per month (plus ₹3000 per month if a chauffeur is provided). The previous limits were ₹2400 per month (plus ₹900 per month for chauffeur).

Situation 2

If the cubic capacity of the engine is less than 1.6 litres, the taxable value of the perquisite is proposed to be ₹2000/month (plus ₹3000/month if a chauffeur is also provided). Previously, the taxable value in this situation was ₹600 per month (plus ₹900 per month for a chauffeur).

If the cubic capacity is more than 1.6 litres, then the taxable value of the perquisite will be ₹3000 per month (plus ₹3000 per month if a chauffeur is provided). The previous limits were ₹900 per month (plus ₹900 per month for the chauffeur).

Situation 3

If the cubic capacity of the engine is less than 1.6 litres, the taxable value of the perquisite is proposed to be ₹5000/month (plus ₹3000/month if a chauffeur is also provided). Previously, the taxable value in this situation was ₹1800 per month (plus ₹900 per month if a chauffeur is also provided).

If the cubic capacity is more than 1.6 litres, then the taxable value of the perquisite will be ₹7000 per month (plus ₹3000 per month if a chauffeur is provided). The previous limits were ₹2400 per month (plus ₹900 per month for the chauffeur).

Perquisite calculation: How the proposed rules may affect your tax liability

The overall tax impact due to the proposed rules may vary based on which of the three situation the taxpayer falls under. It will also depend on whether the taxpayer is using the chauffeur's service. The tax impact will be lower if the chauffeur service is not provided.

Please note that the valuation of the perquisite and the valuation methodology will remain the same under both new and old tax regimes.

Let's understand with an example.

Now, if the motor car perquisite is taken into consideration, then under the existing rules, there will be an additional taxable amount of ₹1800*12 = ₹21,200. At 9.99% rate, the tax will be approx. ₹2158.88.

Under the proposed draft rules, the taxable motor car perquisite will be ₹5000*12 = ₹60,000. At 9.99%, the tax will be ₹5,996.88.

Thus, the calculation shows that there could be an additional tax of ₹3,838.01 due to proposed rules compared to the existing rules.

The following table shows this calculation, along with additional tax burden in Situation 1 without chauffeur if the salary is ₹30 lakh and ₹50 lakh, respectively, under the new tax regime.

Proposed Motor car perquisite impact: Existing vs revised rules

Please note that the facts of the above table may vary in a real-life situation. The actual tax impact can vary from case to case basis. Moreover, the draft income-tax rules are not yet final. They may undergo some changes before final implementation. We will keep you updated.