Hi Srinivasan,
It is certainly non taxable if paid out as a reimbursement. The employee will enjoy tax benefits as this would not form a part of the taxable income of the salary.
However, as an employer, the company shall pay a Fringe Benefit Tax of 6.78% on the total amount of reimbursement paid to its employees.
The best thing to do is to ask the employee about the kind of bills that he / she can provide the most common of them are:
- Medical (Upto a limit of INR 1250 per month)
- Conveyance (Allowed bills are fuel, car driver salary receipts, vehicle servicing bills)
- Telephone (Mobile & Landline bills in the name of the employee & prepaid recharge bills)
- Books & Periodicals
One good thing about a tax friendly salary structure is that the total amount of Reimbursements should not exceed 25% of the total gross salary of the employee.
Should you have any queries, please feel free to revert.
Thanks