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
From India, Mumbai
Partner - Risk Management
Esi & Pf Consultant
+4 Others


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
From India, Madras
Premkumar Nair

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.

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?
From India, Mumbai
Premkumar Nair

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.

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

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
From India, Lucknow

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

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.

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.

From India, Mumbai

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