Is My Travel Expense Reimbursement Taxable? Seeking Advice on Managing Payments

My job involves a lot of traveling. The expenses I need to pay by myself, and after submission of bills, my company reimburses me, which comes to my salary savings bank account. I need to understand if all the credits to my savings bank account are taxable, or will you advise me to open a reimbursement account.

Let me explain in simple language. "Income Tax" is always on the income of the employee or the earnings of the employee. In your case, you spent some money to book tickets, hire a cab, etc. This is considered expenditure. The company simply reimburses the amount spent on their behalf. How can there be tax on this amount?

To avoid confusion, I recommend providing Form-16 to your CA. Additionally, provide him with the bank statement. In the bank statement, circle the non-salary credits. This will help your CA understand what is income and what was reimbursement.

Thanks,
Dinesh Divekar

I fully endorse Dinesh. Also, as a precaution, it's always better to have a separate reimbursement account or, even better, to use Corporate Credit cards for such purposes.

Reimbursements and Taxability

Reimbursements are not taxable. Some employers facilitate opening a bank account specifically for reimbursements. When I was at L&T, they facilitated the reimbursement account with ICICI.

Regards,
Pon

As long as you can provide the supporting bill stating the expenses made for the company, there will be no TDS. Otherwise, it will be treated as income, and tax will be deducted.

Let me narrate my scenario, which is quite similar. I'm a retainer/consultant with a reputed company and submit a monthly consultancy fees bill, getting paid for the same each month. In the same monthly bill, I also claim amounts for some reimbursements like mobile and local conveyance spent on company business. When I get paid, they deduct 10% TDS on the total amount (including fees and reimbursements) and later provide me with a TDS certificate (Form 16A) for the deductions. I had inquired with them, but their finance department says it's as per law. In their words, "As per IT Act 1961, they have deducted 10% flat on all my claims & fees."

Let me know if this is correct.

The opinion of Mr. Isarahmed is correct to the extent that the company deducts income tax at 10% on all his reimbursements as he falls under the professional fee category. He is not an employee of the company. Actually, the reimbursements for company business work, such as transport, tour, and travel, etc., are not taxable and are not a part of the CTC. Mr. Isarahmed would have to claim an income tax refund by showing these reimbursements as his expenses in his income tax return.

If you are an employee of the company and you are sent on a tour for company business, then in that case, all the tour and travel expenses are not a part of your CTC and do not attract income tax. It does not matter whether these are deposited along with your salary or as a separate one in your salary account or another account in the bank.

Let me narrate my scenario, which is quite similar. I'm a retainer/consultant with a reputed company and submit a monthly consultancy fees bill, getting paid for the same each month. In the same monthly bill, I also claim amounts for some reimbursements like mobile and local conveyance spent on company business. When I get paid, they deduct 10% TDS on the total amount (including fees and reimbursements) and later provide me with a TDS certificate (Form 16A) for the deductions. I had inquired with them, but their finance says it's as per law. In their words: "As per IT Act 1961, they have deducted 10% Flat on all my Claims & Fees."

Let me know if this is correct.

Your case has been treated as payments to "Consultant," deducting TDS @ 10% u/s 194 J as a precaution to avoid penalty & interest for failure of deducting TDS & remitting to the government. However, you can claim a deduction from Business/Profession income for expenses incurred towards travel, etc., as these are supported by bills.

Since you are not an employee but an external consultant, what your client is doing is correct, i.e., deduction of tax for all the payable amounts. Let me suggest one option to escape from TDS on supplementary claims. I recommend you raise the invoice for your consultancy charges. These charges are taxable under Section 194J of the IT Act 1961.

For all your supporting bills, such as transportation or mobile bills, claim them separately and take the cash from the accounts. Do not consolidate all the bills and raise a reimbursement invoice, as this invoice will also be taxable. The better solution is to raise a voucher for each claim separately. Just attach a summary of the claim on white paper. Before doing this, check with the accounts department whether they are ready to accept bills for the local claim. If not, then you will have to continue with the existing procedure.

Regards,
DVD

In my job, I do extra work like conducting exams for various departments such as posts, banks, etc. I will be paid as the Chief Examiner, Chief Superintendent, etc., which I may receive around Rs. 3,000 to Rs. 6,000 quarterly or every six months. Since the amount exceeds Rs. 500, it will be issued as a crossed cheque, which I need to deposit into my bank account. Is this income taxable to me?

Kindly reply as solicited.

Let me narrate my scenario, which is quite similar. I'm a retainer/consultant with a reputed company and submit a monthly consultancy fees bill and get paid for the same each month. In the same monthly bill, I also claim amounts for some reimbursements like mobile and local conveyance spent on company business. When I get paid, they deduct 10% TDS on the total amount (including fees and reimbursements) and also later provide me a TDS certificate (Form 16A) for the deductions. I had inquired with them, but their finance says it's as per the law. In their words, "As per IT Act 1961, they have deducted 10% flat on all my claims & fees."

Let me know if this is correct.

As Mr. Dinesh advised, please provide 2 different bills for your fees and reimbursements separately. They can deduct 10% only on fees and not on any other charges if it is specifically mentioned. With regards to TDS already deducted for which you have received Form 16A, please consult your CA with your original bills of reimbursement, and they will guide you to claim the refund.