Tax · Guide

Driver salary and company car: how much is taxed from April 2026

Short answer

From 1 April 2026, an employer-owned car used for both work and personal travel, with running costs paid by the employer, is taxed at Rs 5,000 a month for engines up to 1.6 litres and Rs 7,000 above that. If the employer also pays a chauffeur, Rs 3,000 a month is added. Electric cars use the lower value.

A company car and driver are perquisites: benefits taxed as part of your salary. They are not taxed at what they cost the employer but at fixed monthly values in the Income-tax Rules. The Income-tax Rules, 2026 raised those values sharply, for the first time in years.

By FinancePaisa Editorial Team · Research & editorialUpdated 22 October 2026 · 2 min read

On this page (5 sections)

What are the new car and driver perquisite values?

For a car owned or hired by the employer, used for both official and personal purposes, with the employer paying running and maintenance costs:

Item	Up to 31 March 2026	From 1 April 2026
Car up to 1.6 litres, or electric	Rs 1,800 a month	Rs 5,000 a month
Car above 1.6 litres	Rs 2,400 a month	Rs 7,000 a month
Chauffeur provided	Rs 900 a month	Rs 3,000 a month

Car up to 1.6 litres, or electric
Up to 31 March 2026
Rs 1,800 a month
From 1 April 2026
Rs 5,000 a month
Car above 1.6 litres
Up to 31 March 2026
Rs 2,400 a month
From 1 April 2026
Rs 7,000 a month
Chauffeur provided
Up to 31 March 2026
Rs 900 a month
From 1 April 2026
Rs 3,000 a month

Worked example: 1.5-litre company car with a driver

Your employer gives you a 1.5-litre car with a driver for office and personal use and pays all running costs. From tax year 2026-27 the taxable perquisite is Rs 96,000 a year, against Rs 32,400 before. In the 30% slab, tax on the perquisite rises from Rs 10,109 to Rs 29,952 a year including cess. Your Form 16 shows it under perquisites.

What should I check with my employer?

Whether the car is treated as mixed use or official use only, and what records the employer keeps for official use.
Engine capacity, which decides the Rs 5,000 or Rs 7,000 value.
Whether a chauffeur is included, which adds Rs 3,000 a month.
That the April 2026 values are used in your monthly TDS, so you do not face a shortfall at year end.

Frequently asked questions

Is a company car taxable in the new regime?

Yes. Perquisites are part of salary in both regimes. The new regime removes most deductions and exemptions, not perquisite tax.

How is an electric company car valued?

From 1 April 2026, electric vehicles are valued like cars up to 1.6 litres: Rs 5,000 a month for mixed use, plus Rs 3,000 if a chauffeur is provided.

Driver ki salary par tax lagta hai? Is the driver's salary taxed in my hands?

When the employer provides a chauffeur with a car used partly for personal travel, Rs 3,000 a month is added to your taxable salary from April 2026.

Sources & references

India: Income-tax Rules, 2026 notified (flash alert 2026-081) — KPMG (checked 22 Oct 2026)
Income-tax Rules 2026: a reset of employee perquisites and allowances — Faceless Compliance (checked 22 Oct 2026)
Final Income-tax Rules 2026 notified: what salaried employees must know — Upstox (checked 22 Oct 2026)

Rates, fees, eligibility, and product terms cited on this page reflect the sources above at the time of publication and may have changed since. Always verify directly with the lender or regulator.