Most of the employees get confused between medical allowance part of the salary structure . Medical allowance is a fixed component that you receive every month as part of your monthly salary, that is taxable as salary income. No bills are required to be submitted for taking this allowance. Whereas Medical reimbursement is a tax-free component and as discussed above, it is exempted up to the amount spent by employee or Rs.15,000 whichever is less.
The tax exemption benefits are available only on the actual travel expenses incurred on the rail, road, or air fares only subject to the following conditions.
Travel by Air: The air fare of the economy class of the national carrier (Air India) by the shortest route or the actual expenditure incurred, whichever is less, can be claimed for tax exemption.
Travel by Train: If the place of the origin and destination are connected by rail and journey is performed by any mode of transport other than air, then the First Class AC rail fare by the shortest route or the actual amount spent, whichever is less, can be claimed for tax exemption.
Any reimbursement for fuel charges incurred by the employee for official duty is considered as fuel or petrol reimbursement. The amount paid is up to the extent of bills produced. Tax exemption: It is completely exempt from tax in the hands of the employee and considered as an expense to the employer.
Our system also provides you with, telephone reimbursement provided to employees is not taxable according to Rule 3(7)(ix) of the Income Tax Act. If your office work demands a mobile/telephone/internet connection, you can claim a 100% exemption on the billed amount.
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