Many salaried employees believe the new income tax regime has taken away most tax-saving benefits. But that may not be entirely true. According to a Sebi-registered investment adviser, one lesser-known option still exists—and it revolves around employer-provided car leases.
“Everyone keeps saying the new tax regime killed all salary tax breaks. They’re wrong,” he wrote on LinkedIn, pointing to a structure that continues to offer savings even without traditional deductions.
HOW CAR LEASING THROUGH EMPLOYER HELPS
A car lease offered by an employer can reduce your taxable salary. Instead of you buying the car outright, the company pays the lease amount, and only a fixed perquisite value is added to your income for tax purposes.
“One can use an Employer Car Lease policy to still save tax. And no, the new tax regime didn’t kill this benefit,” he explains.
Because this is treated as a perquisite and not a deduction, it still works under the new tax regime, which otherwise limits most exemptions.
ADDITIONAL COSTS CAN ALSO BE COVERED
The benefits do not stop at just the car. Expenses like fuel, insurance and maintenance can also be included as part of the lease structure, depending on the company’s policy.
“A Rs 15 lakh car effectively costs you 30% to 40% less over 4 to 5 years compared to buying it outright with post-tax income,” he says.
This bundled approach makes the overall cost significantly lower for many salaried individuals.
OWNERSHIP COMES LATER—BUT CHEAPER
At the end of the lease period, employees usually get the option to buy the car at a pre-decided residual value. This is typically around 20% to 25% of the car’s original price.
“That’s when it truly becomes ‘yours’ and even that buyout price is way below market,” he says.
WHERE THINGS CAN GO WRONG
While the structure sounds attractive, it comes with risks—especially for those who frequently change jobs.
“If you leave the company before the lease ends, you have two options,” he says, adding that both can be difficult. One is transferring the lease, which is rare and often complicated. The other is paying the remaining amount in one go.
“I’ve seen a client pay Rs 6 lakh out of pocket because he switched jobs in year 2 of a 5-year lease,” he shares.
Another challenge arises if your next employer does not offer a similar lease policy. In such cases, the tax advantage disappears, but the financial commitment continues.
“So suddenly you’re holding a car that no longer gives you any tax advantage,” he explains.
THINK BEFORE YOU COMMIT
The expert says a car lease works best for those who plan to stay with the same employer for the full lease period.
“Car lease is brilliant if you’re stable in your job for the lease tenure,” he says. “If you’re someone who switches every 2 to 3 years for better pay, the math flips against you.”
His final advice is simple—do not let short-term tax savings influence long-term career decisions.
