Car Lease Still Taxed or not - Exempt Under the New Income Tax Regime?

As the income tax season kicks in, one question is on everyone's mind — which regime is better: old or new? While people compare deductions, exemptions, and slabs, a new doubt has emerged:

“What happens to the car lease benefit provided by the employer under the new regime? Is it still exempt?”

Car Lease Taxability

Let’s break it down simply.

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🚗 What is a Car Lease Policy?

Many employers offer a car lease option as part of your CTC (Cost-to-Company). Under this, the company leases a car on your behalf and pays the lease rentals directly to the leasing company.

Now here’s the important part:

➡️ This lease rental is not paid to you, and hence, it doesn’t form part of your taxable salary.

➡️ So, even though it’s part of your CTC, it’s not treated as income in your hands.

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💡 So, What Gets Taxed?

Under the Income Tax rules, only a nominal perquisite value is added to your taxable salary — and this depends on the engine capacity of the car:

• ₹1,800 per month – if the car engine is less than or equal to 1.6 litres

• ₹2,400 per month – if the car engine is more than 1.6 litres

That’s it!

✅ Even if your employer pays ₹20,000, ₹30,000, or more per month as car lease rental, you’re taxed only ₹1,800 or ₹2,400 based on the car type.

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📌 Applicable in the New Regime Too?

Yes. Since this perquisite value is defined under Rule 3 of the Income Tax Rules, and not a deduction or exemption that’s disallowed under the new regime (Section 115BAC), this benefit continues even if you opt for the new regime.