Here’s why a leased car should be part of your salary package.

26 Jun 2020

When an employer talks about your salary, they mean your basic starting salary. Various components are then added to this number to create your final ‘salary package’. These are additional benefits or incentives – like house rent allowance, telephone reimbursements, car allowance and bonuses. When you think of these benefits prudently, you’ll notice that they make up a considerable amount of your income before tax. And some of these benefits, like a car allowance, can help you reduce your tax liability significantly. If the lease rental of the car is part of your salary package, it means the lease amount would be reduced from your salary before taxes are paid, thereby reducing your taxable income and giving you a considerable tax advantage as compared to someone who hasn’t opted for this benefit.

Even when it comes to car maintenance, there are specific allowances made that can help you reduce your tax burden. “In cases where a company car is given to the employee as part of his CTC, it’s not only the lease rental which is pre tax but also other expenses related to maintenance, driver expense and fuel allowances can be a part of the pre tax component” says Mr. Venkatesh K. Country Head, Sales of ALD Automotive.

To illustrate an example, lets assume your salary package is Rs. 10,00,000. Out of this, Rs. 2,00,000 is your car lease amount, and another Rs. 1,50,000 is allocated towards car maintenance, insurance, fuel and driver allowance. This means, Rs. 3,50,000 will be deducted from your taxable income, and you will be liable to pay tax on Rs. 6,50,000 only.

Apart from the tax benefit, there are more obvious advantages of driving yourself. Especially in these trying times, where public transport could involve bumping shoulders with strangers, travelling in the comfort of your car can mean safety for you and peace of mind for your loved ones.

So, if you’re in negotiations with an employer, or are looking to switch jobs, make sure to check what your salary package would comprise of. Find out if they can give you a car lease and maintenance allowance. If you need more information on how the lease works, you can read all about it here.

Gone are the days when driving a car was a luxury or indulgence. Today, it has become a necessity for most people, even if it means commuting short distances. And many employers have started recognizing this need and are taking appropriate steps to extend the benefit of a leased car to their employees.

Although leasing a car is a relatively new concept in India, it has seen widespread acceptance among corporates, who report that it has greatly helped improve the morale of their employees, while saving them from the hustle-bustle of everyday commute. Which is why, we always advise having a leased car as part of your salary package.

Read more about the different kinds of car leases available, and find the one that best suits your needs here