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Concept of PER DIEM

Ankit (C.A.-Student) (680 Points)

09 May 2010

Hello everyone.

i am a CA student & nowadays busy in audit of Pvt Ltd Co. & i am very confused with a concept Per Diem

What is Per Diem? (Related with travelling)

How Its entry to be done in books of accounts ?

Its a part of salary or company's expense?

If a person(employee) saves some amount from per diem, he has to give back to company or if he hasn't then will it be treated as part of his salary?

How to audit (approach) these kind of expenses?

-please help me in this matter

Thanks

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Amir (Learner) (4016 Points)
Replied 10 May 2010

Dear Ankit,

Per Diem - Its mean Per Day.

It is a daily allowance given to meet the cost during tours.

For Employer - it is a travelling expenditure.

Generally it is fixed irrespective of actual expenditure incurred by the employee that's why any saving out of it is not to be returned back to the company.

Nevertheless, the saving will form part of taxable salary under Income tax act. So when an employee returns from any tour, he needs to submit a certificate or detail of expenses out of the per diem allowance in order to calculate the taxable portion.

For verification of these claims you can see -

1) The organizations documented pocily with regards to tour & per diem allowance.

2) Approvals like that of HOD ,etc with a view to identify the purpose of visit was that personal or official

3) Employees certificate/detail of expenses & their treatment while calculating taxable salary.

4) Ordinary vouching on test basis - Calculation, supportings of expenditure, dates of travel, etc

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