Your company buys the car and pays the EMI. You take an equivalent pay cut (salary sacrifice).
You pay tax on a lower salary — the question is whether that tax saving beats the interest cost.
Try:
₹
₹
%
yrs
Perquisite is added back to your taxable income — it partially offsets the savings.
ppl
Each person contributes an equal share of the EMI as salary sacrifice. Perquisite is also split equally.
₹
PPF, ELSS, LIC, EPF, etc. — max ₹1,50,000
Tax Saved—over full tenure
Interest Cost—total paid to lender
Net——
Breakdown
Tax on current salary— / yr
EMI (per month)— / mo
EMI per month (your share)— / mo
EMI (yearly)— / yr
EMI yearly (your share)— / yr
Reduced salary (after EMI deduction)— / yr
Tax on reduced salary— / yr
Total tax saved (— yrs combined)—
Total interest paid — per person (— yrs)—
Total interest paid — overall (— yrs)—
All — people combined
Combined tax saved—
Total interest on loan—
Combined depreciation benefit—
Group net gain / loss—
Optimal vs Equal Allocation
Optimal allocation gives the most EMI weight to whoever can reach the ₹12L rebate cliff most cheaply.
The remaining budget is equalized by taxable income so everyone ends at the same marginal rate.
Group tax saved — equal split—
Group tax saved — optimal—
Extra group savings from optimal—
Depreciation benefit (15% WDV)
Total depreciation claimed (avg / yr — WDV reduces each year)—
Tax saving due to depreciation (avg / yr · ~27% corporate tax)—
Total Profit—
Why pool?
With — people sharing the EMI, each person sacrifices only —/mo instead of the full —/mo. The group collectively captures — in total tax savings over the tenure.
Approximate for FY 2025-26. Perquisite valuation per Income Tax Rule 3. Does not account for surcharge (applicable above ₹50L income), HRA, NPS, or other deductions. Depreciation assumes the employer's effective corporate tax rate of ~27%. Consult a CA for tax planning.
How to use
Select your tax regime (New or Old) for FY 2025-26.
Enter your annual CTC salary and the car loan amount.
Set the interest rate and loan tenure in years.
Choose engine capacity — this determines the monthly perquisite value added back to your income.
Optionally toggle Depreciation Benefit to include the employer's 15% WDV tax benefit.
If colleagues are sharing the car, increase "People Pooling" and enter each person's salary.
A green net result means the deal saves more in tax than it costs in interest.
Frequently Asked Questions
What is car salary sacrifice and how does it save tax?
Your company buys the car and pays the EMI. In return your salary is reduced by the same amount. You pay income tax on the lower salary — which can save a significant sum if it pushes you below a slab boundary or the ₹12L rebate threshold under the New Regime.
What is the perquisite value under Rule 3?
When a company car is available for personal use, a notional amount is added back to your taxable income — ₹1,800/month for engines up to 1600cc and ₹2,400/month for larger engines. This partially offsets the salary sacrifice tax benefit.
Which tax regime benefits more from salary sacrifice?
The New Regime is often better for mid-income earners due to the ₹12L rebate cliff — reducing taxable income below ₹12L can eliminate tax entirely. The Old Regime can win for high earners with large 80C deductions already maxed out.
How does fleet pooling work?
Multiple employees share the EMI as salary sacrifice. Each person takes a smaller pay cut, yet collectively the group's combined tax savings may exceed the full loan interest. The Optimal Allocation section shows the best EMI split to maximise group savings.
What is the WDV depreciation benefit?
The employer claims 15% Written Down Value depreciation on the car annually, reducing their taxable business income. At an effective corporate tax rate of ~27%, this generates a real cash benefit that can be passed on to employees sharing the car.
When does salary sacrifice NOT make sense?
If the EMI interest exceeds your tax savings, the deal is a net loss. This happens when your salary is already below the rebate limit, the loan rate is high, or the perquisite significantly offsets the benefit. The calculator shows the exact net figure.
Did you know?
The Income Tax Rule 3 perquisite rates (₹1,800 and ₹2,400/month) have remained unchanged since 2007 — they were never revised for inflation, making the effective tax cost of a company car progressively cheaper each year.
A ₹12L salary earner in the New Regime who sacrifices just enough to fall under the ₹12L rebate threshold pays zero income tax — a saving of up to ₹75,000 in a single year from a relatively small EMI contribution.
Fleet pooling for even two employees can flip a borderline deal into a clear winner: both people halve their EMI sacrifice while each potentially crossing a different tax slab boundary, multiplying the group benefit.