Mobile Reimbursement includes both telephone and mobile reimbursement and covers expenses of the telephone including a broadband connection.
Income tax law allows an employee to claim tax-free reimbursement of expenses incurred. An employee can claim payment of the actual salary amount or reimbursement of the amount provided in the salary package, whichever is less.
Mobile Reimbursement Challenges
Pay your employee’s full mobile bill
- By simply paying your employees’ cell phone bills, you are bypassing any sticky legal issues or long-drawn debates in percentage.
- Mobile Reimbursement policy is particularly suitable for companies whose employees regularly use their phones for work.
- On the base of the size of the company and the number of employees working on it. Mobile-Phone Reimbursement is quite costly.
Require employees to prove cell phone use
- The employer needs to know whether their employee is demanding work-related expense.
- In such cases company made a policy where the employees need to show work-related cell phone usage.
- A solution is to calculate the average time spent on work-related projects and then pay that amount of the employee’s total cell phone bill.
- This is useful as employers are paying employees for what they are using.
Pay employees a fixed amount
- Some companies just pay employees the full amount only on the condition if the employees agree to that amount and are written on the policy.
- If employees feel entitled to more than the stipulated amount, many companies require them to submit proof.
- The biggest benefit of this approach is that the cost is stable.
- This makes it easier for employers to allocate money to cover budget and cell phone reimbursement.
Create Mobile phone expense accounts
- Expense accounts are common in large corporations requiring employees to travel and network as part of their job descriptions.
- This means employees are getting paid for the amount they are utilizing for work-related purposes.
- For an Employer this a hectic legal work which increases more cost.
- It is also difficult to calculate a true figure in terms of cell phone usage for employees with unlimited data plans.
Issue Company Phones
- This is the best option especially for a large company with more employees.
- Expenses will be calculated already calculated by giving the company mobile phone to the employees.
- Employers just need to see that the employees are not using the company’s mobile phone for their personal use.
- The employers had access to all the company mobile phone-call records and can control all the associated plans.
- The company also considers the cost of a mobile phone before purchasing because if employee damage, loss, etc it in case this adds replacement costs to the equation.
Also, read | Leave Travel Allowance (LTA)
How to Set -up a Mobile Phone Reimbursement Policy
With so many advancements in mobile phone technology, it is advisable always to make a changeable policy.
Creating a cell phone policy is not an easy task. You need to make sure that it is consistent and complies with the terms of your current expense policy.
Three things to keep in mind while creating a cell phone reimbursement policy
- Pick the plan that suits your organization
- Determine the cell phone policy for your company
- Use an automated expense management software
The IRS rules for Mobile Phone reimbursements
- Before 2010 if a company provides a mobile phone to an employee the company/organization the IRS considered as a listed asset and treated it as a fringe advantage.
- The value of the equipment is included in the salary to the employer as long as it is not a working condition fringe benefit.
- After the Business Jobs Act of 2010 Mobile phones were no longer listed assets for the tax year beginning December 31, 2009.
- The value of the mobile phone was still to be included in the employee’s salary as a taxable benefit.
After IRS rules for Mobile Phone reimbursements
- However, after the IRS Notice 2011–72, a company-provided mobile phone is considered as a functional status fringe benefit for business purposes.
- Any personal use of a cell phone is considered a de minimis fringe benefit, which is excluded from wages.
- Before IRS there was no basic clarity on how to use the phones.
- As a result, the IRS issued a memorandum on how to manage reimbursement to employees of employee-owned mobile phones.
- The value of any use of employer-provided mobile phone reimbursement is excluded from the employee’s income.
FAQ’s Related to Mobile Reimbursement
- Telephone allowance exemption under section 10
Under section 10 (14) (ii) for salaried employees, the above allowance is exempted to the extent of the amount received or whichever is lower than the specified limit.
In such a case, the allowances exempt under Section 10 (14)(ii) would be lower by Rs. 1000 or Rs. 800 (as per the table given above).
- What is the Telephone allowance exemption limit for Assessment Year 2020-21
The cost of the residential telephone will be free and the number of free calls up to the limit of 1500 per month will be exempt. 1 7. Sec. 10 (14)
Special Compensatory Allowance (Hill Area) (Subject to certain conditions and locations) The amount of exemption from tax varies from Rs.
- Mobile reimbursement policy for employees in India
The expenditure on mobile phones made by the employer on behalf of the employee will not be treated as a taxable privileged of the employee and is completely exempt from income tax in India.
However, the maximum amount of such reimbursement is set by the employer
- Mobile reimbursement policy for ESIC/Central Government
Officers of the level of Secretary and equivalent shall be entitled to reimbursement for a mobile handset costing not more than Rs. 25,000 / – once during the entire tenure (twenty-five thousand only).
- Did mobile phone reimbursement is taxable income?
According to the IRS rule, when employers give employees money as a reimbursement for the commercial use of personal cell phones, that money is not taxable.
- What is the Mobile Reimbursement policy?
In the mobile reimbursement policy, employees purchase a mobile phone (from a list of company-approved devices) with a service plan.
The company then reimburses the initial cost of the mobile phone and the service plan fees each month upon receiving the corresponding receipt.
- What is the Impact of GST on Mobile Reimbursement?
Makes a contractual agreement with the recipient of the supply to act as its pure agent to incur expenses or costs during the supply of goods or services or both.
Therefore, GST applies to reimbursement of expenses, except in reimbursement, is like pure agency