Supriya_HR Started The Discussion:
Can anyone let me know the differences between allowances and reimbursements?
Also- what are the iff allowances / reimbursements?????
are allowances taxable and reim not?
Thanks & Rdgs
Allowances are taxable.
Reimbursement is the expense made on behalf of the company or the company is paying on your behalf and hence is not a direct income thereby not taxable upto a certain slab.
To elaborate a little more.
Allowances are payable irrespective if the amount paid is actually used for the specific purpose it is meant for. Under normal circumstances, they are fully taxable.
However, the Income Tax Act says that some allowances are partially or totally non-taxable, depending upon the attendant circumstances - for instance, House Rent Allowance, Conveyance Allowance, Leave Travel Allowance - see the ITA for full details on how these can be deemed partially or totally non-taxable.
On the other hand, reimbursements are payments made when a specific payment is incurred and allowed as a taxfree payment subject to certain limits. For instance, reimbursement of medical expenses subject to laid down limits.
The taxability of either an Allowance or a Reimbursement depends upon the Income Tax Law then in force. So you have to do some research to know the exact taxability of any payment made.
I hope this has cleared matters.
hai supriya , ita very good topic..the difference between Allowance and reimbursement...
A travel allowance is a definite predetermined amount or grant to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance.
Travel allowances are assessable income of the recipient and may require tax instalment deductions to be withheld.
A travel reimbursement occurs when the recipient is compensated exactly, either in whole or in part, for an expense already incurred.
Travel reimbursements are not assessable income of the recipient but are subject to Fringe Benefits Tax legislation.
This is where a 'lump sum' is paid in the amount of the travel. The lump sum is based on a percentage of the 'budgeted' amounts. Travel advances are not assessable income but are subject to FBT legislation. Travel advances must be acquitted against the 'exact' amount of expenses actually incurred. Unused travel allowance must be repaid.
Please see the link to get more information , i think this will do your purpose .. : http://www.anu.edu.au/finance/manual/500/506_1.htm
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