[ecis2016.org] Know all about reimbursement including what it is and the sectors where it is predominant.
What is reimbursement?
Compensation for an already-made monetary transaction is called a reimbursement. This is made by a company to an employee. An employee receives reimbursement when he makes the payment for a service on behalf of the company from his pocket.
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How is reimbursement different from a refund?
While both reimbursement and refund involve an individual getting money back, there is a key difference.
Reimbursement is when a person has paid money for service on the company’s behalf and gets the same amount back from the company. For example, a person pays his mobile phone bills and gets a reimbursement on them by submitting the bills to the company. Reimbursement is also done during a case of overpayment like payment of advance taxes. Insurance companies also work on the reimbursement model for paying medical bills.
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On the other hand, a refund is getting back the paid money when the service or product is not used or the use of them is not satisfactory.
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Reimbursement: Things to take care of
All companies, as part of their organisation policy, have set rules for reimbursement – the time frame for reimbursement, the conditions for approval and the maximum amount. While reimbursing the money, both parties should ensure that the process is legal. Reimbursements should be done by producing required documents like legitimate bills or medical documents.
Reimbursement: Sectors where it is predominant
There are three sectors where reimbursement is predominant. These include:
- Tax reimbursement
Taxpayers who have overpaid their taxes in the form of tax collected at source (TCS) or tax deducted at source (TDS) are eligible for tax reimbursements. This tax reimbursement can be sought during filing of income tax returns. Also, in case of over-taxation, the money that is refunded by the government forms the reimbursement.
- Insurance reimbursement
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As mentioned above, insurance is an important type of reimbursement. If you have medical insurance, then, a common procedure is to pay money during medical treatment, including associated medical bills and then, file for reimbursement. Filing for reimbursement depends on the insurance policy terms and conditions.
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- Legal reimbursement
Reimbursement in the legal sector may be corporate or personal. These can be in the form of corporate litigation compensation or alimony in case of divorce.
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