Salary, allowances and perquisites
This query is : Resolved
04 November 2011
My employer is a subsidiary of a multinational company. It has a policy of Study support for employees where the company reimburses the Study Material cost and Exam fees to its employees for selected courses which are directly relevant for the job.
They are deducting TDS on such reimbursements by saying that they are in the nature of perquisites. My question is are such reimbursements taxable?
Suppose if the employer whould have directly conducted such course in the office, it would obviously have not been taxable to employees, then why in this case.... as there is no difference in the outcome, the only difference is in the way it is structured....
Any helpful caselaws will be appreciated... Thanks
They are deducting TDS on such reimbursements by saying that they are in the nature of perquisites. My question is are such reimbursements taxable?
Suppose if the employer whould have directly conducted such course in the office, it would obviously have not been taxable to employees, then why in this case.... as there is no difference in the outcome, the only difference is in the way it is structured....
Any helpful caselaws will be appreciated... Thanks
04 November 2011
there is a big difference. when the bill is name of you or in name of company.
when you joined a course and paid fees the bill is in name of you so perquisites and will be taxable in your hand.
but if company is conducted some course then the bill is in name of company so there is no perqs and not taxable in your hand.
when you joined a course and paid fees the bill is in name of you so perquisites and will be taxable in your hand.
but if company is conducted some course then the bill is in name of company so there is no perqs and not taxable in your hand.
04 November 2011
Sir can a stand that it is an expense incurred to properly discharge duties of company and hence not taxable as perquisite be taken as that knoweledge has to be directly applied to work...., because under the same stand even travelling expenses like air ticket, though in name of employee, are not taxable on reimbursement......
04 November 2011
In no case there is liablity of the company to deduct the tax treating such sums as perx.
As even if the said sum is perx-the same is not liable for tax.
and if it is an allowance and the amount of allowaance paid is exactly equal to the sum of actual expenses then no part shall form the taxable income.
As even if the said sum is perx-the same is not liable for tax.
and if it is an allowance and the amount of allowaance paid is exactly equal to the sum of actual expenses then no part shall form the taxable income.
04 November 2011
Sir any specific reason why the said amount is not perq, or even if it is perq then no tax need to be deducted?
22 July 2025
Great question! Here’s a clear breakdown:
Whether study support (reimbursement of study material cost and exam fees) is taxable as perquisites:
Perquisite Definition (Section 17(2) of Income Tax Act):
Perquisites are benefits or amenities provided to an employee by the employer, which can include payment or reimbursement of expenses.
When it is Taxable:
If the employer reimburses expenses incurred in the name of the employee, such reimbursements are considered perquisites and taxable in the hands of the employee.
When it is NOT Taxable:
If the employer directly incurs the expenses (e.g., pays the institute or vendor directly), the amount is not taxable as it is an expense for the employer.
If the amount reimbursed is exactly equal to the actual expenses incurred (and supported by bills), then it is considered a reimbursement of expenses and not taxable.
Expenses incurred exclusively for the purpose of the employer's business and necessary for the employee's job are generally not taxable.
Practical Standpoint on Study Support:
Study support meant to improve the employee’s skills for the employer’s benefit is treated as a business expense for the employer.
However, when the employee pays first and claims reimbursement, the income tax department can treat the reimbursement as a perquisite if the payment is to the employee and the bill is in the employee’s name.
When the company directly pays the course provider, it's clearly a business expense, and hence, no perquisite arises.
Why is travel reimbursement treated differently?
Travel expenses reimbursed to the employee for official travel are not taxable because they are considered expenses incurred on behalf of the employer, not a perquisite.
Usually, these expenses are substantiated by bills/tickets, and are not treated as income.
Key Points to Take:
If your employer reimburses the exact actual cost with proof, even if in your name, TDS should not be deducted or it should be adjusted correctly while filing.
If the reimbursement is excess or without proof, it may be treated as a perquisite and taxable.
When the employer pays directly, no perquisite arises.
Relevant case laws and rulings:
CIT vs. E.I.D. Parry (India) Ltd. (SC) – Payment of education expenses on behalf of employees not taxable.
ITO vs. S.S. Rao (Delhi HC) – Reimbursement of course fees for employee's development not taxable as perquisite when it's job-related.
Suggestion:
You can request your employer to:
Reimburse based on actual bills submitted.
Avoid TDS deduction if exact expense reimbursement.
Or pay directly to the institution.
Whether study support (reimbursement of study material cost and exam fees) is taxable as perquisites:
Perquisite Definition (Section 17(2) of Income Tax Act):
Perquisites are benefits or amenities provided to an employee by the employer, which can include payment or reimbursement of expenses.
When it is Taxable:
If the employer reimburses expenses incurred in the name of the employee, such reimbursements are considered perquisites and taxable in the hands of the employee.
When it is NOT Taxable:
If the employer directly incurs the expenses (e.g., pays the institute or vendor directly), the amount is not taxable as it is an expense for the employer.
If the amount reimbursed is exactly equal to the actual expenses incurred (and supported by bills), then it is considered a reimbursement of expenses and not taxable.
Expenses incurred exclusively for the purpose of the employer's business and necessary for the employee's job are generally not taxable.
Practical Standpoint on Study Support:
Study support meant to improve the employee’s skills for the employer’s benefit is treated as a business expense for the employer.
However, when the employee pays first and claims reimbursement, the income tax department can treat the reimbursement as a perquisite if the payment is to the employee and the bill is in the employee’s name.
When the company directly pays the course provider, it's clearly a business expense, and hence, no perquisite arises.
Why is travel reimbursement treated differently?
Travel expenses reimbursed to the employee for official travel are not taxable because they are considered expenses incurred on behalf of the employer, not a perquisite.
Usually, these expenses are substantiated by bills/tickets, and are not treated as income.
Key Points to Take:
If your employer reimburses the exact actual cost with proof, even if in your name, TDS should not be deducted or it should be adjusted correctly while filing.
If the reimbursement is excess or without proof, it may be treated as a perquisite and taxable.
When the employer pays directly, no perquisite arises.
Relevant case laws and rulings:
CIT vs. E.I.D. Parry (India) Ltd. (SC) – Payment of education expenses on behalf of employees not taxable.
ITO vs. S.S. Rao (Delhi HC) – Reimbursement of course fees for employee's development not taxable as perquisite when it's job-related.
Suggestion:
You can request your employer to:
Reimburse based on actual bills submitted.
Avoid TDS deduction if exact expense reimbursement.
Or pay directly to the institution.
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