Allowance: Allowances are basically a part of an individual’s salary package to cover the expenses that may incur in the course of his employment. For instance, a sales position profile may need an individual to travel extensively each day to meet with various clients. The employer will bear the costs associated with transportation, such as fuel costs, through transportation allowances. In a similar vein, a variety of different perks are provided to employees to enable them to work regularly and without too much difficulty. There are three different types of allowances. These three types of allowances include: non-taxable, partially taxable, and taxable.
Reimbursement: Payment made by the company to the employee to cover expenses is known as reimbursement. Reimbursements are connected to business expenses, and they don't increase the employee's revenue from their salary in any way. Therefore, there is no tax burden associated with reimbursements.