28 June 2012
Company's policy to approve DA only when employee worked at other than the normal place of business. company trf. whole amt.(travelling exp.+ hotel exp.+ lunch exp+DA) in trevelling exp. is it coorect treament? According to income tax DA should form part of salary after this it will be exempted fully. So what should be company's accounting. Suggestions are invited.. Thanks for participating
28 June 2012
It looks to be appropriate to follow a policy to debit all such expenses in Travelling expense account on following counts:
1. These cost will be incurred only if the employee travels, otherwise not.
2. In order to have comparability of financials from one period to another.
3. DA to be included in Salary is for 'Dearness allowance' part of the salary slip of the employee. It is not related to the DA that is on account of travelling.
Though, there are varied practices. Have seen companies debiting food bills in Staff welfare, local conveyance seperately and accomodation in travelling cost seperately. Thus following nature of expense approach.
The second approach is to avoid the scanner of Income Tax. If the travelling cost look high, there are chances of disallowances especially foreign travel.
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