Corporate Car Lease vs Car Loan Calculator (2026) — Tax Savings

Under a company car lease policy, the lease rental and running expenses (fuel, driver salary, routine maintenance) are deducted directly from your gross salary before calculating TDS income tax. For an employee in the 30% tax bracket, this reduces taxable salary, effectively subsidizing 31.2% of the car's depreciation, interest, and running costs from pre-tax earnings.

At the end of the 3 to 5-year lease period, corporate policies typically offer three choices: (1) Purchase the car at its fair market residual value (usually 18%–22% of original ex-showroom price), (2) Return the vehicle to the leasing company, or (3) Surrender the car and upgrade to a brand new leased vehicle under a fresh policy.

Company car perquisites and employer-provided vehicle lease schemes have specific rules under the Income Tax Act. While common deductions like Section 80C and HRA are removed in the New Tax Regime, corporate car perquisite valuation rules under Rule 3 continue to apply based on engine cubic capacity (under or over 1.6L) rather than standard itemized deductions.