Page 18 - Corporate_Professional_Today

Whether TDS on all

reimbursements justified?

Introduction

1. The provisions of income-tax law are drafted not only to determine
the total income chargeable to tax but also to provide a wider gamut
for deciding whether a receipt is to be treated as income or otherwise.
For example, a receipt in lieu of income is chargeable to tax, whereas
a receipt in lieu of source of income is not chargeable to tax unless
it is specifically provided for taxability in the statute book.
The term “reimbursement” has significance for the reason that the
recipient incurs money and is subsequently compensated by some
other person or authority. To put it otherwise, the person incurring the V. K. SUbrAMANI
expenditure will not get enriched monetarily by way of reimbursement CA
as it is only a recovery of a previous outlay.

There are a few areas in the realm of income-tax where the concept
of reimbursement is applicable and the taxability of the same is also
prescribed therein.

Salary income

2. In the case of salaried employee the terms of contract with employer
may provide for ‘reimbursement’ of any expenditure originally
incurred by the employee. It is paid by the employer subsequently.
When the reimbursement is in the course of employment and the
employee does not get any benefit by way of extra payment there
is no element of income therein. Thus such reimbursement is not
chargeable to tax.
However, there are certain reimbursements such as travelling
allowance in the case of employees engaged in marketing for which
no evidence of the actual expenditure is obtained by the employer.
Yet the amount paid is claimed as exempt in the hands of recipient-
employee under section 10(14).

125
January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 19