Reviewed by Aug 27, 2020| Updated on
Reimbursement is the compensation paid out by an organization for the expenses made an employee from his or her own pocket. It is not restricted only to the employees, even the customers or third parties who have spent an amount on the business-related work will be reimbursed by the company. Reimbursement of business expenses, overpaid taxes, and insurance costs are the most common examples. One should note that reimbursement is not subject to taxation.
Breaking Down Reimbursement
Reimbursement is generally linked with the expenses made for business purpose. Several companies have policies that outline the time at which they would be reimbursing their employees for the expenses they made. Generally, these expenses are associated with business travel and may cover the associated costs such as accommodation, food, transportation, and flight tickets. Companies may also go onto reimburse their employees for other similar expenses like expenses made on pursuing a course or continuing their education.
Apart from business reimbursement, it is also generally used in the insurance field. When a health insurance policyholder is in need of emergency medical attention, then the insured will not have much time left to get in touch with their insurer to understand the extent of coverage they are eligible for. The insured will have to pay for the medical care on their own pocket. After that, they can file for reimbursement with their insurer. The insurer will then determine as to what is covered in the policy and how much the insured will be receiving as the insurance reimbursement.
Tax Reimbursement Reimbursements are very common in taxes. If a taxpayer has paid excess tax for some reason in the form of tax collected at source (TCS), tax deducted at source (TDS), then they can claim that at the time of filing their income tax return (ITR). The excess tax that the taxpayer has paid would be refunded.