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    Per Diem Allowance: Meaning, How Is It Viewed in India, Taxability & Calculation

    pd allowance
    Source: website-files

    Do you know employees receive a daily (per diem) allowance from employers when they are on an official tour? This allowance helps employees to cover working/business trips related expenses efficiently.

    Want to know more about the Per Diem allowance? Stay tuned!

    Team Digit

    What Is Per Diem Allowance?

    per allowance
    source: forbes

    Per Diem refers to an allowance that employers pay employees for each day they spend outside their usual work location to manage daily expenses. Employees can receive Per Diem allowances in addition to Conveyance Allowance.

    Employers usually pay Per Diem allowance for training or any other office-related work for which employees have to relocate to another place. Further, employers pay this allowance to employees when the latter goes on business trips.

     From the above discussion, individuals can easily understand the meaning of Per Diem. Now, let’s dig out more information about the same.

    [Source]

    How Is Per Diem Allowance Viewed in India?

    diem allowance
    source: crrcpa

    Employers pay Per Diem allowance based on the company policy and place of travel. For instance, if employees travel to Rajasthan, their Per Diem allowance will be different from those who are travelling to Mumbai. Likewise, if employees travel to the USA, their allowance will differ depending on the locations they travel to in the USA.

    Per Diem allowance can be added to the salary for tax purposes if the received amount is higher than actually spent. As per the Income Tax rules in India, daily allowance will not be taxable if employees have entirely spent the received amount. However, Per Diem allowance will be taxable and come under the umbrella of salary structure if employees have saved some amount. In such cases, the taxation rule will follow as per the concerned person’s salary and applicable tax bracket.

    There is no fixed amount in the Income Tax provisions for Per Diem allowance. Here, a company or employer can pay any amount as Per Diem Allowance.

    Previously employees could claim Per Diem allowance without submitting any expense report for items including meals, transportation and other expenses. Employers used to pay this allowance as per the travelling location. However, this rule changed in 2018.

    Now, employees have to prove (by submitting bills) the amount they have spent while staying outside/away from home; they can claim for exemption. Alternatively, if employees cannot prove (by submitting bills) they have spent, the income may fall under the section of additional income/undeclared income; hence, it will follow the regular taxation rule.

    In such cases, employers are responsible for deducting tax. If they fail to do so, they will be liable for paying the outstanding tax along with interest. Here, the revenue authorities can also charge a penalty on employers.

    [Source]

    Are Per Diem Payments Taxable in India?

    per diem allowance
    source: wp

    If employees travel abroad for long-term assignments exceeding 3 months, employers usually depute or transfer respective employees to its subsidiary/sister/parent company.

    Suppose, employees of other countries come to India for work-related assignments and stay here for more than 3 months. If the employer pays salaries in Indian currency to these employees instead of their home country’s currency, the earnings will be taxable as per Indian Income Tax guidelines.

    [Source 1]

    [Source 2]

    How to Calculate Per Diem Allowance?

    pd-allowance-calculation
    source: velocityglobal

    The process to calculate Per Diem allowance is very easy as the calculation methods focus on a daily rate. Here, employees have to multiply the Per Diem allowance by the number of days.

    Total Per Diem allowance = Daily Expenses x Total number of days of travel

    If an employee travels to Delhi for 25 days where he or she spends ₹1500 on a daily basis, they will get 25x ₹1500, which equals ₹37,500 as the total Per Diem allowance.

    With an elaborate discussion, this piece on Per Diem allowance comes to an end. Read the details and accumulate all the relevant bills/vouchers to reap the advantages of this allowance.

    Frequently Asked Questions

    Is Per Diem a part of an employee’s salary?

    No, Per Diem is not a part of an employee’s salary to the extent it is actually spent of expenses. A daily allowance is taxable if not solely used for those purposes. [Source]

    No, Per Diem is not a part of an employee’s salary to the extent it is actually spent of expenses. A daily allowance is taxable if not solely used for those purposes.

    [Source]

    How to claim Per Diem Allowance?

    To claim Per Diem allowance, employees need to keep all the bills and submit them to employers during the process. There may be certain bills which employees cannot maintain or produce, such as newspaper bills and many other things. In such cases, they have to furnish self-declaration to employers declaring the amount spent. If employees can furnish bills/vouchers as well as self-declaration of the amount spent, they can claim the entire Per Diem allowance, and no remaining balance will be taxable.

    To claim Per Diem allowance, employees need to keep all the bills and submit them to employers during the process. There may be certain bills which employees cannot maintain or produce, such as newspaper bills and many other things. In such cases, they have to furnish self-declaration to employers declaring the amount spent. If employees can furnish bills/vouchers as well as self-declaration of the amount spent, they can claim the entire Per Diem allowance, and no remaining balance will be taxable.

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    Author: Team Digit

    Last updated: 20-05-2025

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    Go Digit General Insurance Limited | Corporate Office Address: Atlantis, 95, 4th B Cross Road, Koramangala Industrial Layout, 5th Block, Bengaluru 560095 | Registered Office Address: 1 to 6 floors, Ananta One (AR One), Pride Hotel Lane, Narveer Tanaji Wadi, Shivaji Nagar, Pune-411005, Maharashtra | Trade logo of Go Digit General Insurance Ltd. displayed above belongs to Go Digit lnfoworks Services Private Limited and is provided and used by Go Digit General Insurance Ltd. under license.

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