How you can save tax on buying a mobile phone, laptop or leasing a car
MUMBAI
:
Most employees have transitioned to the new regime for lower tax rates without investments, but at the cost of tax benefits like meal cards.
However, the new regime still allows employers to reimburse the cost of mobile phones, laptops, or car leases if they are used for official purposes. Some companies allow you to buy these devices after 12 months of use.
This is one hidden benefit that you can unlock as an employee in the new regime.
How does it work?
A phone or a laptop can be structured as a tripartite agreement between the employer, employee, and a leasing company. The company buys the phone and rents it to the employer. The employer allows an employee to use it (for official or work purposes). After 1 or 2 years, the employer sells the phone or laptop to you at a discount, according to Vardhan Koshal, founder of asset leasing company Tortoise.
Also Read: How to get taxpayers to spend their tax savings
The device leasing process begins with the leasing company reaching out to a corporate client—let's say, ABC Ltd—with a proposal to offer a device leasing programme for its employees
'The leasing firm evaluates the financial credibility of the corporate client, not the individual employees. Once approved, a rental agreement is signed between the leasing company and the corporate entity," according to Tarun Soni, founder and chief executive of asset leasing company Astrafin.
This arrangement means the employer holds the financial liability, not the employees, according to Soni.
After the agreement is signed, the employer nominates employees who will receive the devices. The leasing company procures and provides these devices. While the employees use the devices, they are not responsible for the lease in a legal or financial sense. Instead, the lease amount is deducted from the employees' pre-tax salary, reducing their taxable income.
'For example, if an employee earns ₹1 lakh per month and leases a device for ₹10,000 monthly, their income tax is calculated on ₹90,000 instead of ₹1 lakh," Soni explained.
Also Read: Golden tax window for NRIs: What RNOR means and how to use it
This mechanism can lead to significant tax savings. For someone in the 30% tax bracket, the savings would be ₹3,000 per month, or ₹36,000 annually. 'Even after paying the lease amount, the employee experiences a net financial benefit because of the tax savings," Soni added.
The lease structure treats the device expense similarly to a reimbursement since the phone is used only for official purposes. Once the lease term—typically 12 months—concludes, the device remains the property of the leasing company. Technically, the contract requires the device to be returned, but in practice, it's often sold to the employee.
'Companies like Tortoise may act as intermediaries in these resale transactions, and the resale value is usually nominal—around 2–7% of the original price," Soni added.
Although this price cannot be predetermined in the lease contract, it is validated through market quotations or valuation certificates to ensure fairness.
If a device costs ₹1.1 lakh and the employee pays ₹10,000 per month over 12 months (totalling ₹1.2 lakh), they save ₹36,000 through tax benefits. As Soni breaks it down, 'Their effective outflow is ₹84,000 (at a 30% tax bracket). If they choose to purchase the device at the end of the lease for, say, ₹6,000, their total cost becomes ₹90,000—still a ₹20,000 benefit over an outright purchase."
Also Read: Capital gains on equities: Here's all you need to know when filing tax returns this year
An additional advantage unique to mobile device leasing is the ability to claim input tax credit (ITC) on the goods and services tax (GST) paid. 'Unlike car leasing, which doesn't qualify for ITC under the GST law, mobile phone leasing allows employers to claim ITC. This can even be passed on to the employee, reducing their effective cost further."
Given that mobile phones are extensively used for business, often 70–80% or more, classifying them as business expenses is both practical and defensible from a compliance standpoint.
Unlike car leasing, which is often reserved for top-tier executives due to its high cost and limited availability, mobile phone or laptop leasing offers a more inclusive and scalable solution for companies. 'Device leasing can cater to a much wider employee base, making it accessible to the broader workforce rather than just a select few," Soni said.
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