Have questions? Ask us!

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.

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
Subscribe to get more insights like this.

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 two different ways that expense can be reimbursed.

Per Diem Allowances

Per diem allowances are fixed reimbursement rates and may be calculated based on a monthly period, depending on the type of vehicle.  The employee does not have to document mileage or provide receipts and the allowance is non-taxable.

Standard Mileage Rates

As an alternative, employees may claim reimbursement for actual mileage that is for business purposes.  Commuting time is not reimbursed in India, but some mileage costs may be.

Client Case: Can employee travel expenses be reimbursed without receipts?

Context:

One of our clients with employees in India wanted to know if expenses without receipts could be reimbursed if they were small amounts.  They also asked if there were a maximum allowable reimbursement for expenses without receipts.

Solution:

We informed them that the employee can submit a self-declaration/self-attested form with expense details and a signature to receive reimbursement.  However, the maximum amount for a single expense without a receipt would be USD$15.

Do you need more information about India?

Companies that are new to hiring employees in India may have more questions such as:

Are there per diem rates for accommodation and meals as well as mileage? 

Can receipts be submitted in either paper or electronic modes?

How is transportation reimbursement handled if there is a mixed business and personal purpose?

Compliance with foreign payroll and expense reimbursement rules is a challenge for all of our clients, and we provide them with real-time advice with the help of our in-country experts.

We make international employment simple.

 Need more information about employing in a new country? Learn more about:

 

 

Looking to hire an employee in India? Get in touch.

Related Articles

Are you managing a remote or global team?

Join 14,000+ managers receiving remote guides and international HR resources!