Are Relocation Expenses Really Taxable? Let's Discuss Why This Happens

I believe relocation expenses are those that are reimbursed to us as a benefit for joining the company, which are spent from our pocket. Why should these be taxable? Are these expenses really taxable?

Please let me know if you need further assistance.

Tax Exemption on Travel Allowances

Under section 10(14) of the Income Tax rules, allowances granted to meet the costs of travel on tour or transfer are exempt from income tax.

Regards,
R. Ponraj

Thank you for the response. Can I also get a proper link that describes this section in detail and is from the Government of India IT? I should probably let my employer see this clause. Please let me know.

Thank you for the response. Can I also get a proper link that describes this section in detail and is from the Government of India IT? I should probably let my employer see this clause. Please let me know.

Refer here under the heading (iii) Allowances exempted u/s 10(14) Directorate of Income Tax, RSP & PR, New Delhi

Regards, R.Ponraj

I can see that an allowance is granted to meet the cost of travel on tour or transfer. However, this doesn't mention anything about 'household movement expenses'. Is this by default included in the 'cost of travel on tour or transfer'? Please advise.

Dear Bharath, this may sound like an elaborate answer, but this is how we did it.

- Raise a request for the relocation benefit through the ERP.
- Once the employee travels, they would submit the bills, including the air travel for family, and truck/roadways bills for shifting household furniture.
- Cars and other vehicles owned by the employee would be offered an amount. However, the octroi would not be a part of the amount.
- The clearance would be made by the Finance team on submission of all the bills. The amount is credited through the salary.

The moral of the story is that the amount remained tax-free subject to the bill submission. Although there was a clause in the policy where it was mentioned that if the employee leaves the company within a year of relocation, the amount would be recovered. But as it seems, it's a retention strategy.

Please share if you have further queries.

Regards,
(Cite Contribution)

That's pretty helpful. Thank you. One last question please, does all this apply to a movement from Company A at City 1 to Company B at City 2? It doesn't really apply to 'internal transfers'—i.e., Company A at City 1 to Company A at City 2. Am I correct?

Hi Bharath, there is no such rule for this. If the transfer is within the same company but to a different location, or to a different company at a different location, reimbursement is always exempted. I hope I have answered your query.

Regards.

It is very clearly written in the Income Tax rules as under: "Any allowance, whether granted on tour or for the period of the journey in connection with transfer (including any sum paid in connection with transfer, packing, and transportation of personal effects on such transfer)" is exempt. Directorate of Income Tax, RSP & PR, New Delhi

Regards,
R.Ponraj

Whatever you have spent during the relocation due to transfer from one place to another is only reimbursed, and it may not be considered as an allowance or pay. Hence, it is fully tax-exempt.

Regards,
S. Bhaskar
[Phone Number Removed For Privacy Reasons]

Understanding the IT Act on Relocation Expenses

The IT Act is not specific on the various queries raised, but the intention of the Act is that all the expenses incurred by an employee on transfer are covered. Obviously, while on transfer, the employee will carry his (including family) belongings and household goods to another place/station. Any amount received by the employee as reimbursement thereof, by whatsoever name it is called, is exempt from payment of Income Tax.

The intention of the exemption under the IT Act is that the employee is reimbursed for the expenses incurred and no income is generated out of the exemption.

TR Chhabria