Reimbursement

Reimbursement is the process through which an organization compensates an employee, client, or other party for expenses incurred or payments made on its behalf. It ensures that individuals are repaid for legitimate and documented costs associated with official duties, travel, or business-related activities. Unlike regular salary or wages, reimbursements are not treated as taxable income, provided they are substantiated by valid receipts and directly linked to business purposes.

Example: An employee who spends ₹10,000 on airfare and accommodation for an official business trip can claim reimbursement upon submission of appropriate receipts, ensuring they are fully compensated for work-related expenditures.