Reducing tax liability

972 views 7 replies

 

Hi, 

I am a student, and I have been studying compensation structure for sales personnel.

 

Based on a compensation structure I had planned for a salesperson with the help of a CA, some questions were put to me in class. I have already consulted the CA on the same and have put the answers in brackets.

Could anyone help in clarifying the same with further details? It will be helpful if you give any limits in terms of the amount that could potentially be reimbursed in such situations or if there are any limits.

 

   The intention in all these cases is to reduce tax liability

 

1.

The salesperson has a Flat which is in his mother's name. There is a Joint A/C between him and his mother. He is staying along with his mother in this flat but he is paying rent to his mother. He receives an acknowledgement for this i.e. Receipt of Payment of Rent from his mother and he produces the same. In this situation what will be the maximum limit till which he can claim the reimbursement?

(ANSWER OBTAINED: CANNOT BE REIMBURSED)

 

2.

If he is using Company's Uniform and sending it to Laundry. Can he claim for Laundry exps reimbursement?

(ANSWER OBTAINED: CAN CLAIM REIMBURSEMENT)

 

3.

Petrol Expenses if he is already using Company's Travelling facility (eg: Car)

(ANSWER OBTAINED: CAN CLAIM REIMBURSEMENT) 

 

4.

Soft Furnishing Reimbursement ( Curtains, Chair Covers, Cushions, etc)

(ANSWER OBTAINED: CANNOT BE REIMBURSED)

 

5.

Subscripttttttion to Business Periodicals for the purpose of improving his knowledge. (Eg. Wall street journal etc.)

(ANSWER OBTAINED: CANNOT BE REIMBURSED) 

 

6.

Obtaining a Personality Makeover i.e a haircut etc. with the intention of being more presentable at his job.

(ANSWER OBTAINED: CANNOT BE REIMBURSED)

 

Any observations will be helpful.

Thank you.

Replies (7)

All the answers you obtained are almost Correct in his view

Here are my ways to defend the Case

 

In Case 1, you said Property is registered with his mother and He has Joint a/c. What Joint A/c ?? 

If they are the joint owners he can't claim, If not company can reiumburse in the form of HRA

 

Case 2-- Reiumbursement to purchase and Maintain uniform tax exempted

 

Case 3-- If he is already using company CAR for official puposes, no question of Reiumbursement,  if using for only commuting between office and Home, to the exent of reiumbursement towards official tour and travel exempted

 

Case 4--- Soft furnishing Reiumbursement- Could't get where he is going to use them?? if in company premises itself, its a company exp, no question of taxing reiumbursement, or at any other place to the extent he can produce bills, i mean actually spent, exempted

 

Case 5-- It can be exempted to the extent actully spent (Sec 10(14)(i)), has to provide bills

 

Case 6-- Generally Personal Exp, But If the job profile requires high personal hygiene and company providing any allowance it can obviously be claimed.

 

So finally, its all depends on how we can provide explanations

We can seek the help of Sec 10(14)(i), if we can prove that the exp if only for comany business promotion

Hi

I am also a student Studying with Nithin. Thank you very much for your views. 

Some clarifications on the above case,

Case 1 - The Joint a/c here means that the Flat is registered in the name of the Employee and his Mother. Both have equal rights to this Flat. 

Case 4 - Soft Furishing is mostly for the Flat where he stays with his mother

 

Thank you

Case-1--- He can't claim then,

Here one more possibility, He can claim in the form of HRA, if he can prove that he is staying for rent at some other palce because of his employement.

 

Case-2--- Then it has nothing to do with business of employer, so not possible 

Hope you guys have already considered other allowances like Medical Reiumbursement, Telephone Allowance, LTA, Internet Allowance for reducing Tax liability

 

Otherwise plan for them too

We have already considered Medical allowances, LTA, etc

Thank you very much for your Observations. This will help us a lot.

In case 1 - What if it is a Joint Bank a/c & not Joint Ownership of the Flat? Will there be any changes in the reimbursement so as to exempt it from Tax?

Case-1 In such a case, He can Claim in the Form HRA, but he has to proove that he is paying rent to his Mother, (can proove, as his mother has basic exemption, no tax for her rental income)

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