Income Tax Exemption on Relocation Allowance

Income Tax Exemption on Relocation Allowance

Relocation Allowance, as per Section 10 (14) of the Income Tax Act, 1961, read with Rule 2BB of the Income Tax Rules, 1962, is any allowance (including packing and transportation of personal effects) paid to meet the cost of travel or on transfer. In respect of ordinary daily charges incurred during the period of travel

Employee’s Transfer And Relocation Allowance Relation

  • In the present age, increasing digitization and globalization have cleared the approach to the more prominent extension of organizations into multi geographic areas. 
  • The broad reach of the network has granted representatives the advantage of working for an organization through various areas inside the country. 
  • What’s more, that too without exchanging the work or the company. 
  • The way of life of moving or migrating representatives because of business rebuilding, wherein the reasons can be another undertaking/task or preferred freedoms are more obvious over ever. 
  • A portion of these exchanges gives an individual the choice of moving with the family, or the whole group under an office or in an office to be moved. 
  • Moving to another city has its own average cost for basic items and driving. 
  • Subsequently, the extra costs that emerge because of migration are repaid by the worker, either straightforwardly to the concerned individuals or by implication through compensation i.e. through Relocation Allowance. 

More About Tax Exemption On Relocation Allowance

  • Income tax exemption on Relocation Allowance falls under Section 10 (4), 1961, and under Income-charge rules, Rule 2BB, 1962
  • Relocation Allowance peruses that any allowance that is conceded to meet the expense of travel-packaging and transportation of individual impact, everyday charges supported on the span of the journey because of the exchange can be claimed as tax exemptions.
  • The predetermined costs caused because of the transfer, i.e., the relocation allowance can be claimed as tax exemption as duty exclusion, yet just to the degree of the genuine costs as indicated. 
  • Real indicated costs mean the sum paid by the business that covers the specific movement stipend. 
  • Then again, the sum paid more than the genuine determined costs brought about by the business will be available as compensation pay. 
  • To claim tax exemption for relocation, vital reports that approve the installment of costs towards move must be kept up. 
  • Additionally, these reports (including receipts and so forth) should to be submitted to the business and the personal expense office. 
  • It is submitted to the business to certify and register the cost archives and duty to be deducted separately from the movement remittance. 

Also, read | Leave Encashment

Highlights Of Tax Exemption on Relocation Allowance 

Here are a couple of remarkable highlights of tax exemption on relocation allowance

Tax Exemptions –

Pressing and moving expense

  • All straightforwardly related costs to the transfer are exempted, packing and moving costs are repaid for the fuel utilized in the vehicle, driver charges, and so forth as they correlate to the Relocation Allowance. 
  • They are considered as close to the home impact of the representative, and henceforth, are exempt from charge.
  • These can either be repaid to the worker against the bills submitted or to the carrier straightforwardly. 

Enrollment of vehicle cost 

  • Registration of the vehicle, if under the name of the representative, is utilized for movement on move falls under the packing and moving expenses. 
  • Vehicle enrollment cost for passage of the vehicle is charged across most pieces of India. 
  • Such costs are additionally charge absolved as it is repaid by the representative if necessities are met. 

Convenience for the underlying time frame 

  • This cost caused during the underlying time of relocation is responsible for its initial 15 days. 
  • It incorporates the expenses of boarding, lodging, eating in the aggregate for those 15 days. 
  • It isn’t taxable in such a case. 

Plane and train tickets for moving

  • This cost falls under direct connection to the transfer, and is caused during the move of areas from prior home to the new area for work is exempted from tax return payments. 

Available Under Salary Income –

School confirmation expenses

  • Fees for school affirmations are viewed as a financial advantage of the representative, and repayment of the equivalent is available under the Income Act as compensation pay. 

New Residence 

  • It is to be noticed that allowances paid by the business as far as cash or in the idea of the essential are considered as compensation payments from the worker, in this manner, is available. 

Financier on house lease

  • Relocating to another spot requires another home, which thusly causes the business cost to the agent for the new home taken. 
  • It is expected of the representative to pay such costs as an individual commitment. 
  • Whenever met by the business, it would be available as worker’s compensation pay. 

Convenience

  • After 15 days, the convenience gave will fall under compensation pay and is available. 

How To Make A Relocation Allowance Claim? 

  • As referenced previously, documents of the expense that occurred during relocation must be kept up for confirmation
  • Any agreement, receipt, and so on the sign by the employer considers an expense document, as it validates the claim and that the payment of expenses incurred to be valid
  • It is for the record of both the employee and the employer. 
  • On account of the business, these costs to repay the relocation allowance will be guaranteed under business consumption in its books of account. 
  • The difference between the actual incurred amount and the paid sum will be taxable
  • The employer plans for re-location and according to relocation reimbursement policy on a tax-benefit basis, so that these expenses can be claimed as business expenses.

 

Nikita Dhyani

Nikita Dhyani is a Content Writer at Ionic Digitech. A passionate content writer and has been using her content writing skills to develop various content related to financial and business-related topics. She has done BAJMC (Bachelors in media and mass communication and journalism) from Graphic Era University. Her specialties include - Content creation, Content development, Media managing, Communications skills.

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