How car leasing can help us to reduce tax liability?

When we talk about our salary, we mean our basic starting salary. Several components are then included to this number to create your final ‘salary package’. These are supplementary benefits or inducements – like house rent allowance (HRA), telephone reimbursements, car allowance and bonuses. When we think of these benefits cautiously, you’ll notice that they make up a substantial 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 benefit as compared to someone who hasn’t opted for this benefit.

But before talking about how car leasing can help us to reduce tax liability, we have to understand what car leasing actually is? As you climb up the ladder in your career, it is usually seen that the employer provides a car to ensure an easy commute for such employees. Such a car can be owned by the employer or the employee. In addition, the expenses related to the car can be backed by the employer or not.

With leasing a car there are other specific allowances which can help you to reduce the tax burden like car maintenance, fuel reimbursement, chauffeur salary etc.

To understand this better, let’s assume your salary package is Rs. 15,00,000. 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. 11,50,000 only.

Other than tax benefits, there are more palpable advantages of driving yourself. Especially in these trying times, where public transport could involve bumping shoulders with strangers, travelling in the ease of your car can mean protection for you and peace of mind for your loved ones.

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.

About Pumpumpum

Pumpumpum, Founded by a passionate team of ex-IITians, Senior Leasing Professionals working on affordable & flexible mobility solutions and are determined to change the way a Pre-Owned Car ownership journey is defined today.

The company is a pioneer in offering short-duration leasing product (6 months to 24 months) on private registered cars at the most affordable lease EMIs. By creating a niche space to support the entire Pre-owned Car ecosystem including car dealers, customers, insurance partners, automobile workshops, banks & NBFCs, PumPumPum is seamlessly taking care of all the Pre-owned Car Owner’s risks such as repair, maintenance, tyres, batteries, car resale value, insurance, etc. for a safe and comfortable journey with hassle-free ownership.?

Offering pure Operating Lease Solutions for the Corporates, SMEs, and MSMEs, the company has strongly established a robust network of supply-side partners- OLX, Cars24, LeasePlan, Avis, SMAS etc.; banking partners- Canara Bank, ICICI bank, Kogta Finance; bureau score and credit partners: Experian etc. and Insurance Partner- IFFCO Tokyo.?

?For more information, please visit:? https://www.pumpumpum.com/