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Tax free reimbursements in CTC structure

Tax queries 1248 views 3 replies

Our company follows a CTC structure where 20% of total CTC can be claimed by employees as tax free reimbursements by producing bills.

Can the reimbusements be claimed unlimited under the following heads (up to max 20% of CTC):

1) Driver salary (by producing salary paid receipt, car not owned by the company)

2) Petrol & Fuel reimbursement

3) Uniform expense reimbursement

My idea is that since nothing is paid by the company over CTC then there can't be any perquisite component. This CTC amount is also mentioned in the appointment letter given to employees.

I would request the expert panel to kindly throw some light regarding this and if possible with some real examples from companies in India.

Thank you all

Replies (3)
  1. Driver salary to the extent Rs.900 pm is exempt from tax. However, higher amount (exceeding Rs.900) would be exempt from tax if used exclusively for official purpose
  2. Maintenance/running (fuel) expenses: If car is used partly for official and partly for personal purpose, then Rs.1800 pm is exempt (if CC of engine is <=1.6 ltr) and Rs.2400 pm exempt (if CC > 1.6 ltr). In this case also, higher amount can be claimed as exempt if used exclusively for offical purpose.
  3. Uniform allowance is exempt only to the extent it is utilized

Thanks for the prompt reply.

But if an employee produces driver salary receipts and claim that the hiring of the driver is for official purpose only then can the company reimburse the amount as tax free reimbursements or any other proof is required?

If used exclusively for official purpose and if the amount exceeds the limit specified, then the employer is required to do the following:

  1. employer to maintain complete details of journey which includes date of journey, destination, mileage & amount of expenditure incurred                                                                                                                                                                 
  2. employer to give a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties


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