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We want to provide Car Allowance to the Senior Managers and Above. What should be the limit for the allowance and how is it calculated? Do employees have to produce any bills to claim it? We already give tax benefit for Fuel and Maintenance based on car capacity.
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You have stated that you are already paying employees for fuel and maintenance and consequently providing tax benefit on the same. Do you plan to pay something called "Car Allowance" in addition to fuel and maintenance allowance?
Is that possible, to pay both Car Allowance and Fuel/Maintenance tax benefit? Car Allowance will be only for the senior management and not for others. Please advice. Regards, Oindri
From the point of view of taxation, Car Allowance shall be fully taxable unless you pay the amount under Car Allowance towards running and maintenance expense of the car (in which case there will be no difference between Car Allowance and Fuel & Maintenance Allowance).
Whether you call it Car Allowance or Fuel/Maintenance Allowance, the amount paid is subject to tax benefit to some extent (with conditions) if you collect bills for the fuel/maintenance expense incurred. If bills are not collected, the entire amount paid (under whatever name) shall be fully taxable.
Please take a look at the below blog post:
Taxability of fuel expense reimbursement to employees -Part II - Hinote Systems - Outsourced Payroll Services & Online Payroll Software
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