Per Diem means an allowance paid by the employer to employee for each day he spent outside of his normal work location to take care of his daily expenses. Per Diem can be claimed in addition to your conveyance allowance.
Employer generally paid Per Diem for training, deputation or any other official work which need to be executed at such other place not being a normal work place of the employee. Even it is paid when a person relocated from his normal work place to another place of employer.
In India employees working in IT industries are frequently flying abroad for knowledge transfer. Any allowance paid as per diem to such employee will also covered under this category.
From above discussion we can conclude that Per Diem is paid to take care of the official expenses.
Tax Liability on Per Diem
Per Diem is not a part of your salary. It’s always paid on the basis of company’s policy and based on the place employee travel. If some one is traveling to Mumbai for a business purpose then his per diem will be different from places like Nagpur. Same way if some one is traveling to USA then the per diem will be based on the places he travels in USA.
But it can be included to your salary for income tax purpose if the amount obtained by you is higher than the amount you spent. According to income tax provisions, daily allowance paid to an employee will not be taxed to the extent of actual expenses incurred i.e. if you saved anything out of your per diem or daily allowance then that saved amount will be included to your salary income and will be taxed accordingly.
There is no specific limit specified in income tax for per diem allowance. A company can pay any amount as per diem allowance. If the employee can proof that he has spent that much money while being outside then the entire amount of per diem will be exempted or else to the extent of the amount spent will be exempted and the balance will be taxable in India.
How to Claim Per Diem for income tax purpose
You need to keep all the bills and provide it to your employer while claiming your per diem allowance. Those expenses for which bill can not be produced, you need to submit a self declaration to your employer by stating that you have actually spent that much money. Some employers are accepting online declaration from there employees. If you provide a declaration that you have spent the entire Per Diem amount then nothing will be taxable in your hand.
How do we file returns if the employer doesnt consider bills and deduct flat tax of 30% even when there are expense on food, beverages and transportation?