Company Car Perquisite Tax 2026: The New ₹5,000–₹7,000 Monthly Values and What They Do to Your CTC Car Lease
By Nitish Bharadwaj · Published Sep 28, 2026 · 7 min
The Income-tax Rules 2026, notified on March 20, 2026 and in force from April 1, 2026, raised the fixed taxable value of a company car used for both official and personal trips. Where the employer pays running costs, the value is now ₹5,000 a month for cars up to 1.6 litres and ₹7,000 above, up from ₹1,800 and ₹2,400. A chauffeur adds ₹3,000, up from ₹900. The perk is taxed under both regimes, so CTC car leases save less tax, though they can still save some from tax year 2026-27.
If your employer gives you a car, or you have one through a CTC car lease, part of your pay from April 2026 has become more taxable. The Income-tax Rules, 2026, notified by CBDT on March 20, 2026 alongside the new Income-tax Act, 2025, set new fixed monthly values for a car used for both official and personal trips. Those values are two to three times the old ones, which had not changed in years. The change applies from tax year 2026-27, so it affects TDS on your current salary and the return you file in 2027. It does not change your FY 2025-26 return.
The Old vs New Monthly Values
The rules value a car perquisite with fixed amounts rather than your actual personal use, as long as the car serves both official and personal purposes. The size cut-off is still an engine capacity of 1.6 litres.
| Situation (mixed official + personal use) | Old value / month (up to FY 2025-26) | New value / month (from April 1, 2026) |
|---|---|---|
| Employer owns or hires the car and pays running costs — up to 1.6L | ₹1,800 | ₹5,000 |
| Employer owns or hires the car and pays running costs — above 1.6L | ₹2,400 | ₹7,000 |
| Employer owns or hires the car, you pay running costs — up to 1.6L | ₹600 | ₹2,000 |
| Employer owns or hires the car, you pay running costs — above 1.6L | ₹900 | ₹3,000 |
| Chauffeur provided by employer (add-on) | ₹900 | ₹3,000 |
The fixed values also matter if you use your own car and your employer reimburses fuel and maintenance. The reimbursement is taxable as salary, except for a fixed amount treated as official use. Under the 2026 rules that amount rises to ₹5,000 or ₹7,000 a month, plus ₹3,000 for a driver, in line with the table above. For employee-owned cars, the higher values mean more of your reimbursement stays tax-free, provided you keep the log book and employer certificate the rules require.
How Much Extra Tax This Means
Take a car above 1.6 litres, with the employer paying fuel and maintenance and no chauffeur. The yearly perquisite rises from ₹28,800 to ₹84,000, which adds ₹55,200 to your taxable salary. Your extra tax depends on your marginal slab, including 4% cess and before any surcharge:
| Car and chauffeur | Increase in yearly perquisite | Extra tax at 20% slab | Extra tax at 30% slab |
|---|---|---|---|
| Up to 1.6L, no chauffeur | ₹38,400 | ₹7,987 | ₹11,981 |
| Above 1.6L, no chauffeur | ₹55,200 | ₹11,482 | ₹17,222 |
| Up to 1.6L, with chauffeur | ₹63,600 | ₹13,229 | ₹19,843 |
| Above 1.6L, with chauffeur | ₹80,400 | ₹16,723 | ₹25,085 |
Your employer should already be deducting TDS on these higher values from April 2026. If your payslip still shows the old ₹1,800 or ₹2,400, ask payroll to correct it now. A shortfall caught in March leaves a large TDS deduction in the last few months, or interest to pay when you file. The same thing happens when a job switch leaves a TDS shortfall across two Form 16s.
Why This Hits Both Tax Regimes
Perquisites are part of salary income, so the new regime taxes them the same way the old one does. That's why the change matters for so many salaried people. HRA, LTA and most Chapter VI-A deductions don't apply in the new regime, and a CTC car lease has been one of the few ways left to structure pay. The other big one, the employer's NPS contribution under Section 80CCD(2), is unaffected.
Does a CTC Car Lease Still Make Sense?
Under a CTC lease, the employer leases a car and deducts the lease rental from your gross pay, often with fuel and maintenance too. You are taxed on the fixed perquisite value instead of the full amount deducted, and the tax saving is the gap between the two. Suppose the lease and running costs deducted from your CTC come to ₹35,000 a month on a car above 1.6 litres. The taxable perquisite was ₹2,400 and is now ₹7,000. In the 30% slab, that cuts your annual tax saving from about ₹1.22 lakh to about ₹1.05 lakh. The lease still saves tax, just less.
The saving shrinks most on cheaper cars. When the monthly deduction is close to ₹10,000–₹15,000, the new ₹5,000 or ₹7,000 value takes a much bigger share of it. Before you renew or start a lease, compare it with a personal car loan. Remember that a lease usually has foreclosure charges if you leave the company early.
What to Do This Year
- Check that your payslip or salary breakup shows the new ₹5,000/₹7,000 value from April 2026.
- If you are using your own car, keep the log book and get the employer certificate so the higher official-use exemption holds.
- Before renewing a CTC lease, work out the tax saving at the new values, not the old ones.
- Rerun your old vs new regime comparison: a higher perquisite value raises your taxable salary equally under both regimes.
- Read our explainer on the new Income-tax Act, 2025 and the 'tax year' to see where perquisite rules now sit.