As per the recent High Court ruling, it shall be in the interest of salaried class who get travel allowance for their official visits either in the home or foreign country to keep travel expenses related receipts handy as else it shall be considered as perquisites that shall be charged to Income tax. Also, on such allowances, the employer will have the liability to deduct TDS.
In a recent case that involves a private limited company based out of Hyderabad, Sun Outsourcing Solutions with branch office at London, UK has put on deputation some of the Indian employees. Also, at the same time, the company employed NRI citizens to serve at its London office.
The employees at the firm were on the payrolls of Sun India and received salary in India, while other boarding allowances were paid in the UK. The company continues to apply withholding taxes on the salary payments made in India but the same did not operated i.e. taxes were not withheld in case of allowances in the UK to employees as well as on salary payments made to NRIs employed there at the company's UK office.
In this regard, the high court upheld that any amount paid as allowance for meeting personal expenses of the assessee at the place where the duties of his office are ordinarily performed is not exempt under the Income Tax Act. And if at all the allowance is tax exempt, it should have been granted in particular wholly in respect of discharge of duties.