What is Reimbursement?

Definition

A reimbursement repays an employee for money they spent on the company behalf. It is not salary, and it should not appear in a salary certificate as income.

How it works

Reimbursements are paid against a bill and repay an actual outlay: travel, fuel, a client meal, a phone bill. Because they restore money the employee already spent, they are not compensation, and treating them as such overstates somebody income to a lender or a consulate.

What it means in India

The tax treatment turns on whether the payment genuinely reimburses an expense incurred wholly for official purposes and is supported by evidence. Fixed monthly allowances paid without bills are generally treated as taxable salary rather than as reimbursement, whatever the payslip calls the line.

What people get wrong

• Including reimbursements in a salary certificate. A bank reconciling the certificate against salary credits will find the mismatch.
• Paying a fixed monthly amount and calling it a reimbursement without collecting bills, which usually makes it taxable salary in substance.

Terms this one depends on

More on pay and salary structure

Where this shows up in practice

Almost everything on this page ends up as a line on a payslip or a figure in a register. Shiftelio keeps attendance, leave, salary structure and the statutory deductions in one place, so the number in the letter and the number in the payslip come from the same record.