How to Claim IT Exemption on Relocation Allowance

Dev Singhraha

Relocation Expert

Globalisation has made the dream of working in different places and gaining experience come true. Moving from one city to another and one country to another is not something new anymore. But the expenses involved with relocating are too high. Growing up in the career is tricky and needs constant efforts. And if there’s a chance to grow and expand your knowledge and experience while relocating, no one wants to miss the experience.

Shifting to a new house, finding a new school for kids, starting all over again, costs a lot for an average person.

There are cases when the employer reimburses or pays the entire amount involved in relation.

We discuss the taxation of these allowances when you move from one city to another:

The cost involved in the fuel of the car is taxable since it employee’s personal liability.
The expenditure involved in moving the stuff with the help of movers and packers is not taxable.
The brokerage paid by the employee for the new house is the employees’ personal obligation. Hence, if it is paid by the employers, then it is taxable.
Tickets for aeroplane and train, lodging or stay in any hotel for up to 15 days are exempted under the Income tax act.
If the employer pays for the relocation charges, remember that it will be taxed as the individual’s income. Similarly, if the employer is paying for the school admission fees then it is evaluated as a monetary benefit and is therefore taxable.

What can you do?

According to the section 10 (14) of the income tax act, 1961, under the rule 2BB of the income tax rules, 1962, any allowance paid to meet the cost incurred in the transfer , including packing and transportation of personal effect, or any ordinary charges incurred in the journey while relocating can be claimed for tax exemption.

To avail the tax exemption when you are relocating, make sure to keep all the documents and receipts for the proof. The receipts shall be duly signed by the employer to enjoy the tax exemption.

If the employer has paid more allowance to the employee than the cost incurred, then the difference becomes taxable.

To know more about your company’s policies regarding the relocation reimbursement, it is better to contact your manager or any concerned authority in HR. it is better to know beforehand what your company is willing to pay for and what not before you relocate.

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