All you Need to Know about Claiming I-T Exemption on Relocation Allowance
Oct 26, 2017 Legal Guidance
Businesses are expanding to a multi geographic location with globalization, economic growth, e-commerce and digitization. An employee working in an organization has several opportunities to work and grow in multiple locations within the country and that too without switching job.
Due to business requirements employees are relocation to other branch offices in other cities within the country and such relocations which includes shifting into a new house, moving household goods, finding a new school for kids, etc., leads to additional expenses to the individual.
These additional expenses are either reimbursed by the Company or sometimes paid directly by the employer on your behalf.
Lest understand the taxability of these allowances:
1)Movers and packers Cost: The expenses incurred by movers and packers would not be taxable whether it is reimbursed to the employee against actual bills or paid directly to the transporter by the employer.
2)Car registration charges: If the personal car of the employee is being used for the transfer of household goods on relocation then the car registration charges for the entry of the vehicle in the new state would come under tax exemption.
3)Personal goods: Other household goods like a car (which includes money spent on fuel and driver charges) are taxable as it is the employee’s personal liability.
4)School Admission fees for Children: School admission fees reimbursement would be considered as a monetary benefit to the employee so it will be taxable as salary income.
5)Brokerage charges: During relocation employee may require paying the brokerage amount for the new house taken and if it is being reimbursed by the company then the amount would be taxable.
6)Train/Airfares for shifting: Train/Airfares for relocating family members from one city to another and hotel accommodation for 15 days is exempted under Income-tax Act. This also includes boarding, lodging, and meals. However, if the expenses incurred beyond 15 days would become taxable as salary income of the employee.
How to claim relocation allowance?
Under section 10(14) of the Income tax Act,1961, and rule 2BB of Income Tax Rules 1962, allowances that are granted to avail the cost of travel/relocation (which includes packing, transportation and daily charges incurred during the period of the journey) can be claimed for tax exemption.
However to claim the payment of expenses incurred by the relocation employee should maintain the documents, proof of payments and any other agreement signed with the employer on claims and payments incurred on transfer. As these documents would be required by the employer because it would be needed by the employer to claim the expenses in its book of accounts under business expenditure head.
In case the employer has paid more relocation allowance than the actual expenses incurred then the extra amount would become taxable for the employee.
Due to business requirements employees are relocation to other branch offices in other cities within the country and such relocations which includes shifting into a new house, moving household goods, finding a new school for kids, etc., leads to additional expenses to the individual.
These additional expenses are either reimbursed by the Company or sometimes paid directly by the employer on your behalf.
Lest understand the taxability of these allowances:
1)Movers and packers Cost: The expenses incurred by movers and packers would not be taxable whether it is reimbursed to the employee against actual bills or paid directly to the transporter by the employer.
2)Car registration charges: If the personal car of the employee is being used for the transfer of household goods on relocation then the car registration charges for the entry of the vehicle in the new state would come under tax exemption.
3)Personal goods: Other household goods like a car (which includes money spent on fuel and driver charges) are taxable as it is the employee’s personal liability.
4)School Admission fees for Children: School admission fees reimbursement would be considered as a monetary benefit to the employee so it will be taxable as salary income.
5)Brokerage charges: During relocation employee may require paying the brokerage amount for the new house taken and if it is being reimbursed by the company then the amount would be taxable.
6)Train/Airfares for shifting: Train/Airfares for relocating family members from one city to another and hotel accommodation for 15 days is exempted under Income-tax Act. This also includes boarding, lodging, and meals. However, if the expenses incurred beyond 15 days would become taxable as salary income of the employee.
How to claim relocation allowance?
Under section 10(14) of the Income tax Act,1961, and rule 2BB of Income Tax Rules 1962, allowances that are granted to avail the cost of travel/relocation (which includes packing, transportation and daily charges incurred during the period of the journey) can be claimed for tax exemption.
However to claim the payment of expenses incurred by the relocation employee should maintain the documents, proof of payments and any other agreement signed with the employer on claims and payments incurred on transfer. As these documents would be required by the employer because it would be needed by the employer to claim the expenses in its book of accounts under business expenditure head.
In case the employer has paid more relocation allowance than the actual expenses incurred then the extra amount would become taxable for the employee.
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