Reimbursement of Telephone exp. exemptions under Income Tax
This query is : Resolved
23 June 2009
01.Whether Income Tax act have any objection on reimbursements of Multiple Telephone Nos. & Prepaid Telephone Bills?
02. Send me the related Income Tax Downloaded Documents with Notification /Section No.
02. Send me the related Income Tax Downloaded Documents with Notification /Section No.
23 June 2009
no objections but it should used for business purpose only.
23 June 2009
Thanks Gurdeep
Telephone reimursement is a part of salary and company is asking for a post paid bill.
Can you provide me any reference in IT where prepaid bills are acceptable in this type of cases
Telephone reimursement is a part of salary and company is asking for a post paid bill.
Can you provide me any reference in IT where prepaid bills are acceptable in this type of cases
20 July 2025
Your question relates to the income tax treatment of telephone expense reimbursement by an employer — particularly whether prepaid telephone bills (instead of postpaid) are acceptable, and if there’s any official section or notification in the Income Tax Act that governs this.
Let’s clarify everything step by step.
✅ 1. Is reimbursement of telephone bills taxable?
Yes and No — it depends on the nature of usage.
🔹 If used for official/business purposes only:
Reimbursement is not taxable in the hands of the employee.
It is excluded from “perquisites” under Section 10(14) read with Rule 2BB of the Income Tax Rules, 1962.
This applies regardless of prepaid or postpaid, provided proof of business usage is submitted and accepted by employer.
🔹 If used for personal purposes or mixed use:
It is considered a taxable perquisite, and forms part of salary income.
✅ 2. Can prepaid telephone bills be reimbursed and exempt?
Yes. There is no restriction in the Income Tax Act or Rules that mandates only postpaid bills for exemption. What matters is:
Proof of payment (recharge slips, receipts, etc.),
Declaration of official use, and
Employer’s policy to accept prepaid bills as valid.
📌 Employer can choose to:
Accept prepaid bills for reimbursement, if accompanied with usage declaration, or
Restrict to postpaid bills for easier documentation — but that’s policy-driven, not tax law-mandated.
📜 3. Relevant Legal References:
🔸 Section 10(14)(i) – Special Allowances
“Any such special allowance or benefit, not in the nature of a perquisite, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit...”
🔸 Rule 2BB(1)(v) – List of exempt allowances includes:
“any allowance granted to meet the expenditure incurred on a helper, or on conveyance in performance of duties, or for travel, or to meet the expenditure on a telephone (including a mobile phone) actually incurred by the employee in the performance of his duties.”
🔹 No mention of prepaid vs postpaid – both are eligible as long as conditions are met.
Let’s clarify everything step by step.
✅ 1. Is reimbursement of telephone bills taxable?
Yes and No — it depends on the nature of usage.
🔹 If used for official/business purposes only:
Reimbursement is not taxable in the hands of the employee.
It is excluded from “perquisites” under Section 10(14) read with Rule 2BB of the Income Tax Rules, 1962.
This applies regardless of prepaid or postpaid, provided proof of business usage is submitted and accepted by employer.
🔹 If used for personal purposes or mixed use:
It is considered a taxable perquisite, and forms part of salary income.
✅ 2. Can prepaid telephone bills be reimbursed and exempt?
Yes. There is no restriction in the Income Tax Act or Rules that mandates only postpaid bills for exemption. What matters is:
Proof of payment (recharge slips, receipts, etc.),
Declaration of official use, and
Employer’s policy to accept prepaid bills as valid.
📌 Employer can choose to:
Accept prepaid bills for reimbursement, if accompanied with usage declaration, or
Restrict to postpaid bills for easier documentation — but that’s policy-driven, not tax law-mandated.
📜 3. Relevant Legal References:
🔸 Section 10(14)(i) – Special Allowances
“Any such special allowance or benefit, not in the nature of a perquisite, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit...”
🔸 Rule 2BB(1)(v) – List of exempt allowances includes:
“any allowance granted to meet the expenditure incurred on a helper, or on conveyance in performance of duties, or for travel, or to meet the expenditure on a telephone (including a mobile phone) actually incurred by the employee in the performance of his duties.”
🔹 No mention of prepaid vs postpaid – both are eligible as long as conditions are met.
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