How to Show Travel Cost as Business Expense to Claim Tax Reimbursement?

I received many comments from our readers (freelance IT professionals and Bloggers) asking how to claim the travel expenses as business expenses to deduct from the tax. Today's article explains how to claim travel expenses and income tax reimbursement for Bloggers and Freelance IT professionals.

Yesterday, I visited the office of our company auditor, Senthil, to discuss the tax return of CoreNetworkZ Tech Solutions. He is a senior Chartered Accountant and has been with our company for six years.

I asked him the questions my readers asked. This article explains the points Senthil CA provided for Freelance IT professionals and Bloggers to claim tax reimbursement for their business and job trips.

Revathi Murugan, a travel blogger, asked whether a Blogger should pay income tax for her blog income. She earns from Google AdSense and Amazon affiliate programs. She said her income is from her WordPress blog and a YouTube channel.

The answer is yes unless her total income falls below the base tax slab.

In India, any person who earns above the base tax slab from his business or profession is legally obliged to pay Income Tax (at the rate decided by the Government of India in a financial year).

However, the Income Tax Act allows them to deduct expenses incurred while performing a profession or business in the financial year from the net income in the same period.

The cost of traveling for business and profession is one of the major areas where you can save your hard-earned money. So, Revathi can show her travel expenses for her travel blog and the YouTube channel as business expenses.

Adil Ahammed asked this question in the comment section. He is a freelance IT professional and travels a lot due to the nature of his work. Adil Ahammed is a Hardware IT Professional.

Income Tax Act allows any person to deduct the amount he spent on travels he made to perform his business and profession. Here, profession means work done to make a living ( self-employed).

Senthil CA told me the definition of a professional.

The Income Tax department considers anyone who makes earnings using his intelligence or physical strength (not salaried employees), like a practicing doctor, CA, lawyer, Freelance engineer, Blogger, etc, as a professional.

Yes, Bloggers and Freelance IT professionals can claim tax reimbursement for business travel costs.

Traveling for (the sole purpose of ) profession and business is common among these people, and Tax authorities understand it well. So, they can deduct any money they spend on travels associated with pursuing an existing business.

Ranjith Kumar asked about claiming the tax deduction for business travel expenses. As my Chartered Accountant suggested, you can deduct the business travel cost from the total revenue in the IT Return.

However, Senthil CA mentioned the importance of keeping all receipts and bills to avail of the tax deduction. He also told me to maintain the records to prove the intention of the travel as pure business/work.

So, the total revenue under 'Profits and Gains of Business or Profession' is the amount after deducting all expenses, including business travel expenses.

Let me explain an important factor. You cannot show every travel expense as a business travel expense.

You cannot blindly ask for tax deductions for all travel you make in a financial year. The Income Tax Department will look into the nature of your journey, and they must approve that the trip you made was essential for your business or profession.

The Income Tax Department will check the cost you mentioned. You cannot claim an unbelievable amount for the journey and demand Tax exemption while submitting your ITR.

Prithviraj Agarwal, a freelance web developer, asked me this question. You might be disappointed after listening to the answer.

You cannot claim any Tax deductions for your vacation trips. I will explain it with an example.

You went to Manali for a week to enjoy with your family for entertainment. You spent a lot of money on travel and lodging. Though the trip was expensive, you cannot show the cost of this journey as a business expense in ITR.

However, consider a scenario if you meet some potential clients during the trip and spend money to arrange a meeting with them. That portion is a business expense. You can claim a tax deduction for that.

I hope you understand my explanation for what part of the cost of a vacation tour is part of a business cost.

In this section, I will list five points Senthil CA suggested while showing a trip expense as part of business costs.

1. Keeps All Bills and Receipts

   You must keep the receipts and bills related to the journey and all documents which prove why this trip was necessary for your business.

   
   

2. The Sole Purpose of The Travel Must be Business

   You must show the Tax authority that this tour was for the sole purpose of your existing business.

   Senthil CA told me it is unimportant if you did any business on the trip.

   However, you cannot claim a trip as a business trip if that trip is not related to any of your existing business or profession.

   In simple words, you cannot ask for Tax benefits for the trip made for the needs of the future business. For example, if you are in the catering business and planning to start a construction business.

   Until you have started a construction business, you cannot claim tax relaxations as business travel for your trips related to your intention on future construction business.

   
   

3. Travel Costs Must be Realistic

   Let me explain the third important point. You cannot claim an unrealistic amount as your business travel cost.

   You must also show the authorities the mode of transport and where you stayed.

   You can include the Hotel room rent you paid, laundry bills, Internet and phone bills (must be related to your existing business), meals bill, etc, in the travel expense.

   
   

4. You Must Justify The Travel Requirement

   It is the fourth point Senthil CA told me. That is, you should remember while marking a journey as a business journey whether you can justify the intention of that trip.

   I will explain this point with an example.

   Consider you are a businessman in Delhi and want to purchase an item (that is available in Delhi).

   You are going to Mumbai to purchase that item. However, there is not much difference in quality or price from the Delhi market. What do you think? Can you justify that trip? You cannot.

   
   

5. Mode of Payments

   This last point is a bonus tip from Senthil CA for the readers of CoreNetworkZ Tech Solutions. It would be helpful for you while showing travel expenses if you made the digital mode of payments as much as possible.

Purnima Nair asked this question in the comment section. She is a freelance Website developer and occasionally travels to different cities to visit her clients.

Let me answer her question here.

She can include the cost of the mode of transport she used, the room rent paid, meals and other petty expenses while journeying, laundry bill, tolls(if any during the drive), entry fee paid if it was necessary for her profession, cost of arranging meetings with potential clients, etc.

1. https://www.incometax.gov.in/iec/foportal/help/refund_status_user_manual