Company Car and Company Flat: The Taxable Value Under the Income-tax Rules, 2026

A company car and a company flat are often the two largest benefits a senior employee gets, and both are taxed as perquisites, at values fixed by the rules rather than what they cost the employer. From 1 April 2026 the Income-tax Rules, 2026 nearly tripled the car values, while the accommodation percentages stayed where they were. Many payrolls are still running the old car figures half-way through tax year 2026-27. This post gives the current numbers, who they apply to and what the tax regime choice changes.

Who is taxed on these perks

• ✓Accommodation provided by the employer is a taxable perquisite for every employee, whatever the salary.
• ✓A car with personal use is taxable only for a specified employee: a director, a person with 20% or more of the voting power, or an employee whose salary (leaving out non-monetary benefits) is above ₹4 lakh a year. The ₹4 lakh limit was notified by the CBDT in August 2025, replacing the ₹50,000 figure that had stood for decades. In practice nearly everyone given a company car crosses it.

The valuation rules are in Rule 15 of the 2026 Rules, which replaced Rule 3 of the 1962 Rules. The Act's section numbers changed too, but the method is unchanged.

Company car: the values from April 2026

All figures are per month the car is available.

Three other cases:

• ✓Car used only for personal purposes. Value is the actual running and maintenance cost, the chauffeur's pay, and wear and tear at 10% a year of the car's cost, less anything the employee pays.
• ✓Employee's own car, employer reimburses running costs, mixed use. Value is the amount reimbursed, less ₹5,000 or ₹7,000 a month treated as official use.
• ✓Nil value for official use needs two things: the employer keeps complete journey details (date, destination, distance, fuel) and certifies that the expenditure was wholly and exclusively for official duties.

An electric car falls in the lower band, whatever its size.

Company accommodation: the percentages

For a private-sector employer, the value depends on whether the employer owns or leases the house, and on the population of the city as per the 2011 census.

From the total, subtract any rent the employee pays.

"Salary" for this purpose means basic, dearness allowance where it counts for retirement benefits, bonus, commission and taxable allowances, for the period the house is occupied. It leaves out the employer's PF contribution, exempt allowances, perquisites, and lump-sum exit payments such as gratuity and leave encashment.

What the regime choice changes

The valuation is the same in both regimes. A ₹5,000-a-month car is a ₹60,000 perquisite whether the employee chose the new regime or the old one. Two things differ:

• ✓The rate. The perquisite is taxed at the employee's marginal rate, which can be lower in the new regime at the same salary.
• ✓HRA versus a company lease. In the old regime an employee paying rent can claim the HRA exemption. In the new regime HRA is fully taxable. So for a new-regime employee, a flat leased by the company and valued at no more than 10% of salary often costs less tax than the same money paid as HRA. For an old-regime employee with a full HRA exemption, the comparison can go the other way. Run both before changing a structure.

The same logic applies to car-lease policies within CTC: the employee is taxed on the fixed monthly value, not on the lease rent and fuel the company pays. The April 2026 increase narrowed that gap but did not close it.

A worked example

A Chennai engineering company gives its plant head a company-owned furnished flat and a 1.5-litre sedan with a driver, used for office and personal trips, with all running costs paid by the company. Chennai was above 40 lakh in the 2011 census.

His salary for the year: basic and allowances of ₹1,50,000 a month, plus a ₹1,20,000 annual bonus.

1. Salary for the rule: ₹1,50,000 × 12 + ₹1,20,000 = ₹19,20,000.
2. Flat: 10% × ₹19,20,000 = ₹1,92,000.
3. Furniture costing ₹6,00,000: 10% × ₹6,00,000 = ₹60,000.
4. Less rent he pays, ₹3,000 a month: ₹36,000.
5. Accommodation perquisite: ₹1,92,000 + ₹60,000 − ₹36,000 = ₹2,16,000.
6. Car with driver: (₹5,000 + ₹3,000) × 12 = ₹96,000. Under the old rules it would have been (₹1,800 + ₹900) × 12 = ₹32,400, so the taxable value rose by ₹63,600.
7. Total perquisites: ₹2,16,000 + ₹96,000 = ₹3,12,000.

Effect of the regime on the car increase alone:

• ✓New regime: income after the ₹75,000 standard deduction is ₹19,20,000 + ₹3,12,000 − ₹75,000 = ₹21,57,000, in the 25% slab. Extra tax: ₹63,600 × 25% × 1.04 = ₹16,536.
• ✓Old regime, at the 30% slab: ₹63,600 × 30% × 1.04 = ₹19,843.

If payroll kept using ₹2,700 a month from April, the TDS shortfall for those months must be made up in the rest of the year.

Payroll checklist

1. Switch car values to the 2026 figures and recompute the year's TDS projection.
2. Keep journey logs and the official-use certificate for cars you treat as nil.
3. Record each house's city band using the 2011 census, and the furniture cost.
4. Deduct rent and charges the employee pays, with proof of recovery.
5. Show each perquisite in Form 123 (earlier Form 12BA) and carry it into Form 130 (earlier Form 16).

Frequently asked questions

Sources

• ✓Income-tax Rules, 2026, full text, Income Tax Department
• ✓Income-tax Act, 2025, full text, Income Tax Department
• ✓Rule 15 of the Income-tax Rules, 2026: valuation of perquisites, TaxCode
• ✓India: new Income-tax Rules and perquisite values, KPMG flash alert 2026-081
• ✓Salary perquisites under the Income Tax Rules 2026, TaxGarden

This is a summary, not legal advice. Confirm the values against the notified Income-tax Rules, 2026 on incometaxindia.gov.in or with your chartered accountant.