Saswatabanerjee
Partner - Risk Management
Subbarao.v
Esi & Pf Consultant
Pon1965
Construction
Premkumar Nair
Manager (hr)-retired
+3 Others

Thread Started by #parabvishal

Hi If employee spend some amount for official work & same amount he get back from his employer transferred to his salary account, will it effect to any tax deduction? Rgds Vishal
15th October 2013 From India, Mumbai
Dear Parabvishal, why that amount connected to his salary account?whatever he spent it has to be reimbursed.More over it is not eligible for tax
15th October 2013 From India, Madras
Hi,
Any amount spent in the course of employment and reimbursed by the employer is not liable to tax irrespective of whether it is credited to salary account or otherwise. The employer will not incorporate such amounts in Form 16. Hope this clarifies.
15th October 2013 From India, Mumbai
Thanks you but please let me know if employee file return & incometax department find variation in income mentioned in form 16 & employee salary account, then?
15th October 2013 From India, Mumbai
Dear Mr Vishal,
Always it is suggested that any credit or debit in the bank statement should be noted in pencil or pen for future references of such Assessing officers queries. However, under the IT Act, the employer is liable to TDS on salary. You may show such entries with detailed explanation which will satisfy the Income Tax officers. They will take up such matters with employers if they are not satisfied. So the individual need not worry.
15th October 2013 From India, Mumbai
I assume you have a payroll system in place
And also that accounts does a reconciliation between the salary sheet and bank transfers.
If the above is in place, in case of a scrutiny or enquiry, you need to show the working, records and reconciliation to prove that your form 16 is correct. Further, check the possibility of doing separate credits for salary and expenses to minimise a problem

16th October 2013 From India, Mumbai
Salary A/C does not mean only salary is to be credited. Other credits are also allowed incl. his personal money, if any. Expenses incurred for Company work are treated as reimbursements. Pon
16th October 2013 From India, Lucknow
Dear,
Many learned followers have give valid points. To sum up and add mine, pl go through the following :-
1. Income Tax is deducted on Income and not on Reimbursement of expenses connected with Company affairs like - TA/DA, Repair & Maintenance of office equipments etc. etc.
2. At the first instance, such reimbursements should not be paid through salary slip. But if it a matter of system, the amount should be shown against separate head " Reimbursement of Expenses". This amount should not be included in Income while preparing the Form - 16. The same can be shown in Form -24 and subtracted from Total Income under separate Head, as detailed above.
3. In no case, the reimbursement on a/c of expenses on company's affairs can be taxable.
Best Wishes
AK Jain
HR Personnel
NCL, CIL
17th October 2013 From India, Jabalpur
I am sure Vishal Parab, as well all readers will agree to the views expressed by Mr A K Jain, which has great clarity. It is 100 per cent correct that these reimbursements are not taxable.

However, I think Vishal has different kind of thoughts, in his mind. Everything is fine, till reimbursement is done, and no tax is deducted, by the employer. But, when IT officer goes through his bank pass book, and there are credits to his account, paid by employer as reimbursements, it is not always possible to show that these are reimbursements. IT officer may insist that this is your additional income, apart from salary, say incentives etc. This query will be raised after two/three years of actual transaction. At that time, Company’s accounts/salary department, may not cooperate the employee, and he will be in trouble.

I have an example : A field executive, working in Calcutta, offers a prestigious Gift to his client, or organizes business lunch to his client, worth Rs.10000. His HO,located in Gujarat, reimburses these expenses to his bank a/c. After 2 to 3 years, how the said employee can prove to IT officer that this credit to his a/c is not his income, but reimbursement.
17th October 2013 From India, Mumbai
the question that comes up is : was the money spent or was the reimbursement taken without spending. Generally, a large part of the reimbursement today is against credit card expenses. That should be easy to explain.
Second, you can always take and keep copies of expense claims that you have filed and possibly copy of the approvals taken for each months claims which will be matched with the additional reimbursements.
Tax Officers will rarely bother with small salary accounts. It would be different if the employee has huge salary and income.

17th October 2013 From India, Mumbai
[QUOTE=abhaybandekar;2097692
However, I think Vishal has different kind of thoughts, in his mind. Everything is fine, till reimbursement is done, and no tax is deducted, by the employer. But, when IT officer goes through his bank pass book, and there are credits to his account, paid by employer as reimbursements, it is not always possible to show that these are reimbursements. IT officer may insist that this is your additional income, apart from salary, say incentives etc. This query will be raised after two/three years of actual transaction. At that time, Company’s accounts/salary department, may not cooperate the employee, and he will be in trouble.
.[/QUOTE]
To answer to your point, the onus lies with the person who is making/crediting the payment and it his/their responsibility for deducting applicable TDS , if any, but not the recipient as per I.T. rules
17th October 2013 From India, Lucknow
Pom,
I think his worry lies elsewhere,
What if the file of the employee is taken up for scrutiny by the income tax authority.
That would happen probably 2 years later, when he may not even be in the same company.
But when the tax officer scrutinises your file, he is going to ask for explanation for every entry in the bank statement. He will then consider the additional payments (reimbursement) as income, unless the Employee has definite proof that it was a genuine reimbursement

18th October 2013 From India, Mumbai
Can't help it. Normally, I.T. authorities are not behind the Salaried people who only pay the income tax correctly without any deceit and they show some leniency to salaried.
When I was in a reputed organisation some time back, the employer has facilitated to open 2 different bank accounts, one for crediting salary and other for crediting the reimbursements.
Pon
18th October 2013 From India, Lucknow
I think opening 2 separate bank accounts will make the transactions more suspicious.
Such a file will definitely be looked at with a negative light and the ITO will definitely add up payments made to the second account.
It is important instead to keep details of amounts claimed and reimbursed with copies of bills submitted to the office. That will probably be a better solution

18th October 2013 From India, Mumbai
We should not find any tricky way, to escape from the set system. It is a 100 percent truth that Reimbursements are not anybody’s income. If anyone honestly shows all bank credits in his IT return, there must be some official ways, to claim deduction also, for these reimbursed amounts. Also, by not disclosing these amounts, at all in IT return, but by signing an affidavit or declaration, which is to be attached to your Return, one can remain relaxed for the future. Only IT experts can throw some light on this.
18th October 2013 From India, Mumbai
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