File ITR, invest & save upto
₹46,800 in taxes on the go
0% commission • Earn upto 1.5% extra returns
Reviewed by Dec 07, 2022| Updated on
Travel allowance refers to an allowance that is given to meet the cost of travelling of an employee for business purposes. Employees who incur expenses on business activities can claim a reimbursement of the expenses from their employers. The reimbursement would not be taxable to the extent of business expenses. Any amount reimbursed towards the personal expenses of the employee would be taxable in the hands of the employee.
An employee can claim the reimbursement of expenses by furnishing air tickets, travel bills, and so on. The expenses incurred on using rental vehicles can also be claimed as reimbursement, as far as it is incurred for business.
The expenses incurred on any person accompanying the employee on a business tour would be a personal expense and, hence, not allowable as a tax-free reimbursement. The expense are generally reimbursed for short term assignments as against long term assignments. Short term assignments include a tenure up to six months.
In the case of employees who are part of the sales or marketing team, the expense would include those incurred on transhipment of the goods to the place of exhibition or promotion. It would also include the rental for space or stall occupied.
An employer may reimburse both business and personal expenses incurred by an employee during a business assignment or a business trip.
Personal expenses could include expenses on goods purchased for personal consumption other than the regular meals and transport, personal entertainment, and so on. These expenses are those that are not connected to the discharge of official duties.
The key criteria for evaluating the nature of the expense and reimbursement is that it should be related to the business activities of the employer.