Does your employer give you lump-sum allowances, such as uniform allowance, transport allowance, meal allowance, winter-clothing allowance, luggage allowance, entertainment allowance?
Do you know that the above are taxable in the hands of the employees as their personal income tax? All form of employment allowance is taxable for employee.
Exception is per diem allowance for overseas trips( not taxable), which must be subsistence in nature, and the rate of which cannot be excessive and must be within the rate acceptable by IRAS.
On the other hand, reimbursement (employee claim on actual incurred basis) is not taxable in the hands of employees.
But then if your tax bracket is not that high, you wouldn't mind having the extra allowance $ in your pocket and pay a bit of tax, isn't it. In a scenario where the allowance amount is high and the tax bracket of the individual is high, it may be better for the company to provide the benefit in-kind instead of in the form of cash allowances.
Common scenario 1:
Employee A is given telephone allowance of $100/month, but incurs $150/month telephone expenses for business purpose (note $150 must be for business purposes).
Do you know that A can claim $50 ($150-$100) as tax deduction?
Common scenario 2:
Employee A is given transport allowance of $800/month for business travelling purposes. If employee spends this allowance travelling using S-plate car, then the whole $800 *12 = $9,600/year will be taxable in the hand of the employee. But if Employee A uses taxi as a mode of travelling for business purposes, the amount spent on taxi , say $600/mth can be net-off against $800/mth allowance, leaving only $200/mth as taxable income.
Quiz:
1. Prize won in lucky draw at company's event, is it taxable?
2. Long Service Award - is it taxable?
3. Payment in-lieu of unutilized leave - is it taxable?
Common scenario 1:
Employee A is given telephone allowance of $100/month, but incurs $150/month telephone expenses for business purpose (note $150 must be for business purposes).
Do you know that A can claim $50 ($150-$100) as tax deduction?
Common scenario 2:
Employee A is given transport allowance of $800/month for business travelling purposes. If employee spends this allowance travelling using S-plate car, then the whole $800 *12 = $9,600/year will be taxable in the hand of the employee. But if Employee A uses taxi as a mode of travelling for business purposes, the amount spent on taxi , say $600/mth can be net-off against $800/mth allowance, leaving only $200/mth as taxable income.
Quiz:
1. Prize won in lucky draw at company's event, is it taxable?
2. Long Service Award - is it taxable?
3. Payment in-lieu of unutilized leave - is it taxable?
