Reimbursement Bills in Salary Sheets: Should They Go Under Variable Pay or TA?

Dear All, can anyone among us tell me where to add the reimbursement bills of employees in the salary sheet and whether it should be added to the variable pay or TA? This is because TA is not included in the salary structure of the organization.

Thank you.

Dear Shweta Sawale,

Probably, you have confused the terms "salary" and "reimbursement claim."

Definition of Salary

The definition of wage or salary is "money that is paid regularly for doing work." A salary slip is issued so that the employer and employee both can keep a record of the work done and remuneration paid for the work.

Definition of Reimbursement

The definition of reimbursement is "compensation paid for the money already spent." In the course of work, the employee is required to visit places, which incurs expenses. When the employee raises a claim, it is called a reimbursement claim. However, it is over and above the salary.

If you start routing the reimbursement claim through the regular salary, then it will get reflected in the salary slip. What gets reflected in the salary slip becomes taxable. However, income tax is paid on the "earnings" and not on the "expenses."

By the way, how many employees raise the claim? On average, not more than 10% of employees raise reimbursement claims. A company should have the means to handle these claims.

Thanks,

Dinesh Divekar

Hello Shweta, Don't be confused! "TA" relates to the amount of money paid to workers during a business trip for the journey, as well as other expenses. However, reimbursement is when a business pays back an employee, client, or other people for money they spent out of their pocket or for overpaid money. After approval, employees can collect their reimbursement amount from the Account Department.

In any organization, there is a pay structure on which the monthly salary is paid, and it will also be reflected in the payslip. There is also reimbursement of expenses, which are supposed to be business-related costs, not personal costs.

Unfortunately, there are smart organizations that try to avoid income tax. Some personal costs are paid through reimbursements, which is not right. For example, for Travelling Allowance (TA), if it is a fixed amount paid every month, it should be shown in the monthly gross income, not paid as reimbursement to avoid income tax.

I know of an MNC where very senior-level employees (GM & above) receive car fuel reimbursement amounting to 250 liters per month. Obviously, the entire amount is not spent for official purposes, and there is an amount spent for personal purposes. They maintain a logbook, and at the end of every month, they declare the personal portion of spending, which is considered taxable income.

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