A Guide to Travel and Mileage Reimbursement in India

When your employees abroad have to travel for work purposes, they will expect to be reimbursed for expenses.  Each country will have some rules and limitations on what can be reimbursed tax-free, and which items will be considered to be a taxable benefit to the employee.

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India has its own set of travel reimbursement rules that you should understand, as it will affect how items are paid and included as part of payroll.

What type of travel expenses can be reimbursed in India?

The common travel reimbursements in India include:

  • Accommodation
  • Air and train tickets
  • Cab fare
  • Rental car
  • Meals
  • Miscellaneous travel expenses

Are travel reimbursements in India taxable?

Most travel reimbursements and allowances will not be taxable in India, as long as they have a business purpose.  However, India changed its tax code in 2021, and employees will have to choose either the old tax regime or the new regime, which will affect the taxability of travel expenses or allowances. 

If the old regime is chosen, allowances will continue to be non-taxable up to certain limits.  If the new tax regime is chosen, then most allowances will be included as taxable in salary, but the income tax rates are lower.  The election must be made each year by the employee.

How are mileage expenses reimbursed in India?

If an employee chooses to use their own vehicle for work-related travel, there are... read more

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Tim Burgess

Director, Shield GEO Services Ltd