Company car perk gets costlier: Draft Income Tax Rules 2026 could add Rs 4,352 to your tax bill over car perks on Rs 15 lakh salary

The draft Income Tax Rules, 2026 proposed several changes that affect salaried employees. If Parliament approves the draft rules without any changes then salaried employees who use company cars partly for personal use, need to pay higher income tax.

Calculations show that on a Rs 25 lakh salary, salaried employees need to pay Rs 8,387 more income tax. Similarly for Rs 15 lakh salary, the extra tax outgo is Rs 4,352. This is based on the new tax regime, as the taxation of perks doesn’t depend on whether one is under the old or new tax regime.

How much extra tax you need to pay for using company car

Chartered Accountant Suresh Surana explains that if an employer provides a motor car for both work and personal use, and covers fuel and maintenance costs, the taxable perquisite is fixed at Rs 5,000 per month.


If a driver is included, an additional Rs 3,000 per month is added to that. So, the total taxable perquisite works out to Rs 8,000 per month or Rs 96,000 per annum, which is added to the employee’s taxable salary.

Surana says that Rule 15 of the Income-tax Rules, 2026, (corresponding to Rule 3 of the Income-tax Rules, 1962), outlines how to value employee perks. While the new tax regime offers concessional tax rates to individuals and generally disallows most deductions and exemptions, it does not change the method for valuing these perquisites.

Surana says: “Accordingly, the choice between the old and the new tax regime does not affect the valuation of perquisites, and the valuation methodology remains the same for taxpayers under both regimes.”

The table below shows how much extra tax you need to pay:

Particulars	Amount (Rs)
Total CTC	15 Lakh	20 Lakh	25 Lakh
Total Salary	15,00,000	20,00,000	25,00,000
Considering only new tax regime
Standard deduction	75,000	75,000	75,000
Total Taxable Income	14,25,000	19,25,000	24,25,000
Total Tax (including cess)	97,500	1,92,400	3,19,800
Effective Tax Rates (A)	6.84%	9.99%	13.19%
Motor Car Perquisites	Assuming Car used partly for official & partly for private and running & maintenance paid / reimbursed by employer
As per Income Tax Rules 1962 (B) (1800+900)*12 months	32,400	32,400	32,400
Tax on Perquisites (C) [(A)*(B)]	2,217	3,238	4,273
As per Draft Income Tax Rules 2026
As per Income Tax Rules 1962 (D) (5000 + 3000)*12 months	96,000	96,000	96,000
Tax on Perquisites (E) [(A)*(D)]	6,568	9,595	12,660
Additional Tax to be paid by employee due to revision in valuation	4,352	6,357	8,387

Source: CA Suresh Surana

Also read: Higher income tax for salaried people for using company car: Taxable perquisite value to increase under the draft Income Tax Rule, 2026

What else has changed with motor vehicle perquisite taxation under draft tax rules, 2026?

Rule 15 of the draft Income-tax Rules, 2026 has proposed to revise the valuation of motor car perquisites vis-à-vis Rule 3 of the Income-tax Rules, 1962.

Surana mentions that when a car is used partly for official and partly for private purposes and the running and maintenance expenses are paid or reimbursed by the employer, the suggested perk value is Rs 5,000 per month for cars with up to 1.6-litres engine capacity and Rs 7,000 per month for those with above 1.6 litres engine capacity.

Additionally, if a driver is provided, an additional Rs 3,000 per month is added compared to the current Rs 1,800 and Rs 2,400 per month along with Rs 900 per month for a chauffeur as per the existing rules.

Also read: Get up to Rs 1.05 lakh income tax exemption on meal cards: Draft tax rules 2026 boost salaried savings

On the other hand, if the employer pay the running and maintenance expenses, the proposed perquisite value is Rs 2,000 per month (for cars with engine capacity of up to 1.6 litres) and Rs 3,000 monthly (for cars with over 1.6-litres engine capacity), plus Rs 3,000 per month for a chauffeur. This is a change from the old tax rules, 1962, which set the values at Rs 600, Rs 900, and Rs 900 per month respectively.

For reference purposes, the 2025 Hyundai Verna Turbo petrol version has an engine capacity of 1.5 litre (1482 cm3). The Honda City 5th generation petrol engine size is 1.5 litre (1498 cm3). The Hyundai Creta diesel engine’s size is 1.5 liter (1493 cm3). Mahindra 7XO turbo petrol engine’s size is 2 litre (1997 cm3).

Particulars	Rule 15 Income-tax Rules, 2026 (Draft)	Rule 3 of Income-tax Rules, 1962
Car used partly for official & partly for private and running & maintenance paid / reimbursed by employer	Rs 5,000 / month (≤1.6L) or Rs 7,000 / month (>1.6L) + Rs 3,000 per month if chauffeur is also provided.	Rs1,800/month (≤1.6L) or Rs 2,400 / month (>1.6L) + Rs 900 per month if chauffeur is also provided.
Car used partly for official & partly for private and private running & maintenance fully met by employee	Rs 2,000 / month (≤1.6L) or Rs. 3,000 / month (>1.6L) + Rs. 3,000 per month if chauffeur provided by employer.	Rs600/month (≤1.6L) or Rs 900 / month (>1.6L) + Rs 900 per month if chauffeur provided by employer.

Source: CA Suresh Surana