Reimbursement of Car expenses

This query is : Resolved

Satish K Sekhar.ACCA (Querist)
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03 July 2008 My company reimburses petrol & toll expenses and repairs of car owned by me for commuting between office and my residence.

One senir cunsultant is of the contention that the said expenses will be taxed in my hand under perqisites in liew of salary, as only Rs. 800/P.M is allowed for commuting between office and residence.

Or auditor says it will not be taxed in my hand but FBT will have to be paid by the company on such reimbursement.

I am of the opinion that:-

Rs.800/-P.M is the maximum amount of allowance permitted to be duducted from the gross salary while computing the TDS liability.

However where the employer reimburses expenses to the employee for commuting between office and residence , it may not be directly or automatically considered as taxable income in the hands of the employee without giving due respect to the following:-

1.If car expenses are reimbursed,the employer must ensure that the employee maintain a log book which provides proper record of fuel filling and running of the car between office and residence and genuine RD bills of fuel filled with the registration number of the car on the bill etc.

2. If other mode of transport reimbursement provided (for eg.First class railway ticket etc) the proof of ticket pass etc.
3. Where the employee commute in taxi or rikshaw, the factors to take into account are the position of the employee,educational qualification and last but least the justification of such mode of transport being used by the employee due to the reasons that it is the most convenient mode of transport for the said employee to reach office.

pleae anybody give a clarification on this issue

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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03 July 2008 The reimbursements are taxable in your hands.

CA Abhishek Tyagi

CA Abhishek Tyagi (Expert)
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03 July 2008 Hi Satish,

In my opinion your auditor is right.

This is not taxable in your hans but company have to pay FBT on this amount. All you have to do is to preserve the petrol bills as supportings & submit the same with your company duly attached with the reimbursement form/voucher.

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Satish K Sekhar.ACCA

Satish K Sekhar.ACCA (Querist)
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04 July 2008 open