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Reimbursement of directors expenses

rahul (Finance Manager) (91 Points)

14 June 2013

Can a private ltd company reimburse medical, credit card, or any other expenses of director. Does the company or the director pay income tax on these reimbursement amounts? (Section 17(2)) All the reimbursed amounts are actual expenses made by the company on behalf of the director.

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4 Replies

Ritika Pundir (CA) (154 Points)
Replied 15 June 2013

Reimbursement of expenses should be authorized in the AOA of the company. A board resolution allowing reimbursement of expenses is required to be passed before making the payment. Only actual expenses of the Directors shall be reimbursed. Further as per the latest amendment, the clause of reimbursement of expenses is required to be incorporated in the appointment letter of the director.

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rahul (Finance Manager) (91 Points)
Replied 15 June 2013

Thanks for your reply. Will these actual reimbursement expenses be taxed in the hands of the director. Is the same applicable to public limited companies also.

rahul (Finance Manager) (91 Points)
Replied 16 June 2013

Also all the expenses I am talking about are personal expenses of the director. Can they still be reimbursed by the company and not taxed (company and personal) if the AOA and appointment letter state that all expenses are to be reimbursed.