Reimbursement of expenses(Salaried)

Tax planning 918 views 2 replies

MRINAL DAXINI

CHARTERED ACCOUNTANT

128 Points Joined August 2009

Sir I am doing articleship handling individual file of client who is having salary income.His employer is giving certain allowances in the nature of reimbursement.eg.self-development allowance,corporate attire,medical,entertainment etc aggregating Rs. 20,000/- p.m.Company is giving the option to the employee that they can reimburse the actual expenditure out of that allowances provided.The balance amount if any left will be given to employee as a salary which will be added in the Form-16 of the employee.Sir please advice how to account for the same and whether the reimbursement part will be treated as income of the employee?

Replies (2)

Dhawal Mohnot

Practicing

449 Points Joined October 2009

Salary is generally broken up into allowances. These allowances help an individual to produce bills for the respective payments and claim such allowances. When such allowances are claimed the company would not deduct TDS at the time of crediting the salary to the employees account.

At the year end while filing returns, allowances are treated based on the provisions of the IT act... some are allowable upto a certain limit others are fully taxable.

Precisely allowances are provided to encourage spending among the working class employees and for employees the benefit is that TDS deducted would be less and they would receive something extra in hand every month on claiming these allowances.

Corrections are invited.

ALPESH KUMAR

SUPRITENDENT

140 Points Joined November 2009

Dear mrinal.

salary includes fees, commission, perqs, or profit in lieu of salary.

medical exps reimbursement upto Rs. 15000/- will not be cosidered as perqs and hence not included in salary. Exceeding Rs. 15000/- will be included. Where any payment made by employer towards medical exps. to a hosptial, dispensary, clinic which is approved by the Chief Commissioner income tax will be out of the purview of salary and not included. other allowance referred in ur question may be taxable. pl. refer section 17 for more detailed information.