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CS Executive · Tax Laws and Practice · Income under the Head Salary

Ananya received a salary and also Rs 20,000 as reimbursement of actual travel expenses on official duty, supported by bills and incurred wholly for duty. Which statement is correct about computing her taxable salary?

Genuine reimbursement of expenses actually incurred wholly for official duty, backed by bills, is not taxed as salary to that extent. It merely compensates the employee for spending on the employer's work, unlike a fixed allowance, which is generally taxable.

  1. AThe Rs 20,000 is always added to salary since reimbursements are salary
  2. BProfessional tax paid by her cannot be deducted from salary in any case
  3. CEntertainment allowance is deductible for every private-sector employee
  4. DGenuine reimbursement of duty expenses is not treated as salary income to the extent incurred wholly for dutyCorrect

Explanation

Reimbursement of actual expenses incurred for official duty is not a taxable benefit to the extent so spent. Option A is wrong for that reason. Professional tax is deductible, and entertainment allowance deduction is limited to government employees.

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