Calculating Vehicle Maintenance Costs: Should It Be Part of Salary or Reimbursement?

Calculating Company Vehicle Maintenance Cost

Can anyone tell me how to calculate the company vehicle per kilometer maintenance cost? We are considering making car/bike maintenance a part of the salary instead of reimbursing based on actuals.

Impact of Adding Benefits to Salary

Additionally, how can we calculate the impact of adding a benefit to the salary rather than providing reimbursement? How can we compare the costs of having 2-3 employees involved in the reimbursement process versus including that benefit in the salary package?

Regards,
Wajiha

For every kilometer run, just check the mileage of fuel, then the monthly maintenance bill on average from the authorized showroom. You can then calculate it for the month. That's it.

In what sort of industry do you work, and what is your role? Do you have an accounts or finance department? What do you mean by maintenance cost? Does a company vehicle mean one that is given to a staff member to keep as long as he or she works for the company? Do you have figures of what you have reimbursed for different people over the past year?

Paying based on the average spent last year would be acceptable to the TAX authorities? Would people still have to keep a log of mileage covered, etc.?

Thus, you can see a lot of questions need answering before one can give a definitive answer. I think an accountant would be the best person to answer your query.

Have a nice day.

Regards,
Simhan
A retired academic in the UK.

[Note: The link provided has been removed for clarity.]

Logbook Issuance and Calculation Process

First, issue the logbook to those who are using the vehicle and mention the daily traveling kilometers in the logbook. At the beginning of the month, collect the logbook from the employees and calculate the total kilometers. For example, if the total kilometers are 1000 per month and the vehicle consumes 14 kilometers per liter, calculate 1000/14 * petrol/diesel rate. Also, make sure to take a picture at that time.

I presume the following circumstances in your case:

1. Your company provides 2-wheelers and 4-wheelers to your staff for commuting on company matters (no separate drivers).
2. The company tries to avoid paying the petrol or diesel bills as reimbursement to those staff for these trips undertaken by them for company affairs.
3. Repair/replacement costs will be met by the company.

If so, my opinions/suggestions are:

1. Fix mileage per vehicle/per liter of petrol or diesel after considering individually the model/year, condition of the vehicle, city road/traffic conditions (you may obtain the opinion of a popular auto workshop/service garage/shop for your records). Keep this as a thumb rule for paying the mileage allowance for company trips.

2. All the staff who are provided these vehicles should maintain a register on a daily basis recording trip-wise information - such as - from office to customer's place - kilometers traveled onward say 10 kms, return 10 kms. Likewise, each and every trip should be recorded under various columns. Total up the kilometers traveled either every weekend, say Monday to Friday, or from date 1st to 15th or 1st to 31st. Thus, the total mileage traveled say 100 kms.

And if a two-wheeler, it gives 35 kms./per liter of petrol. So 100 kms. divided by 35 kms. = 2.86 liters. Then 2.86 x Rs.65/per liter of petrol = Rs.185.90, say Rs.186/- pay individually through you.

3. By this method, you will also help to avoid income tax problems (if you pay conveyance allowance, it will be taxable as per IT formula).

Alternatively, if you don't follow these procedures, simplify by just obtaining a claim from them certified by their HOD saying so and so has covered ...kms. during the month for official duties and at a mileage allowance @ Rs.5/- per km pay him the money through individual you (rate per km has to be decided by you).

Paying through Salary bill will attract IT. But if you want to jack up the CTC then calculate a monthly allowance based on the projected kms. one has to travel in a month and fix up a monthly allowance, pay through a salary bill. But repairs & maintenance, running costs exceeding the expected kms. to cover have to be answered.

Consider various options and adopt what is best suited to you.

Regards, Kumar, Bg.

Thank you all for your response. I will get back to the concerns if I need further guidance. Thanks once again for taking the time to reply to my query.

Regards, Wajiha