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WheTher TdS on All reimburSemenTS JuSTified?
(including claim of set off of loss) for employers so as to provide liberal perquisites
the purpose of deducting tax at source. to the employees.
(iv) Club membership fees: Where the employer
pays or reimburses membership fee and Reimbursement in respect of business
annual fee of credit card of the employee 3. Explanation 10 to section 43(1) deals with
or any member of his household it is reimbursement of the cost of an asset. Where
chargeable perquisite to the extent of a portion of the cost of the asset is met
actual payment. If the employer has directly or indirectly by the Government or
met only a fraction/portion of the by any other person in the form of subsidy
expenditure, then the perquisite value or grant or reimbursement such portion will
is limited to such fraction/portion met go to reduce the actual cost of the asset. In
or reimbursed by him. Similarly, such result, the depreciation claim in respect of
reimbursement is chargeable to tax in the asset would stand reduced.
respect of membership of a club of
the employee or any member of his The Finance Act, 2015 inserted clause (xviii)
household. in section 2(24) whereby any subsidy or grant
or reimbursement by the Central or State
(v) Tax free reimbursements: The following Government or any authority or body or
perquisites whether incurred by the agency in cash or in kind to the assessee is
employer or incurred by the employee chargeable to tax as income. The Finance Act,
but subsequently reimbursed by the 2016 w.e.f. 1-4-2017 carved out an exception
employer are not chargeable to tax. by holding that such subsidy or grant or
(a) Hotel accommodation up to 15 days reimbursement when it goes to the reduce
on transfer of employee. the actual cost of asset as per the Explanation
10 to section 43(1) then such reimbursement
(b) Newspaper and periodicals. or grant is not to be construed as income.
(c) Medical reimbursements up to ` 15,000.
Reimbursement in respect of TDS
(d) Scholarship provided by employer
to employee’s son/daughter. Provisions
Section 17(2)(iv) provides for any payment made 4. It may so happen that a contractor while
by the employer in respect of any obligation executing the contract incurs certain expenses
which but for such payment, would have which are reimbursable by the contractee,
been payable by the employee and, thus, is i.e., assessee. Whether such reimbursement
a chargeable perquisite, regardless of whether must also be considered for the purpose of
the employee is a specified employee or not. TDS provision is disputed now and then.
The CBDT Circular No. 715 dated 8-8-1995
The computation of perquisite valuation for (215 ITR St.12) deals with the issue as under:
the purpose of ascertaining the income from
salary continues to pose challenge to the Question 30: Whether the deduction of tax
employers’ who have to compute the perquisite at source under sections 194C and 194J has
valuation in accordance with section 17, read to be made out of the gross amount of the
with rule 3 of the Income-tax Rules, 1962. bill including reimbursements or excluding
reimbursement for actual expenses?
There is vast scope for minimizing the
complexity in perquisite valuation and that Answer: Sections 194C and 194J refer to any
would provide much needed relief to the sum paid. Obviously, reimbursements cannot
be deducted out of the bill amount for the
purpose of tax deduction at source.
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January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 21
