Tax-Friendly Car Lease or Rent as Salary Perk: How Does It Affect Your Paycheck?

Can anyone share more info on tax-friendly "car lease" or "car rent" components as part of salary, cost to the company, or perk?

Dear Anirudha,

The best option for companies is to buy a car and allocate it to their employees for official work. This way, the company saves on depreciation, and the employees save on taxes. If the company does not want to make the purchase directly, the next best option would be to have an employee's family member (who is not a taxpayer) buy the car and then lease it to the company. The company can then assign the car back to the employee for official use.

You can choose between these two alternatives. Another option would be to lease a car from an external source and assign it to the employee.

KKT

Dear Anirudh,

Buy a car in the individual's name and let the company pay the EMI for the same. This way, the company can show all the expenses related to the car as business expenses. When the company takes the car in the name of the individual employee, they need not pay higher corporate tax. Also, don't make the car part of the employee's CTC. Thus, after three years, the company can sell the car and show depreciation in the books of accounts.

I am not very good in tax and finance, so kindly do verify the above idea with a finance person before you even think of working on the above idea.

Re: Car Lease Format

I want a format for a car lease to establish a partnership with a company. Can anyone share more information on "car lease" or "car rent"?

Naga

Dear Naga,

Please find the attached file containing the format of the car lease agreement.