Daily Subsistence Allowance (DSA) also known as per diem is exempt from PAYE under section 5(4)(fa) of the Income Tax Act (Cap. 470) where it is paid for official duty away from an employee’s normal place of work and within the rates prescribed by the Commissioner of Domestic Taxes.

Any payment made outside these conditions, including amounts paid in excess of the approved rates or where no qualifying travel occurred, is taxable as employment income under section 5(1) of the ITA.

What Must Be on File
To sustain the exemption, a taxpayer should be able to produce an approved travel authorisation, a DSA (per diem) policy aligned with Commissioner’s rates, proof of travel or attendance, travel reports and payroll records showing DSA as a separate item.

Therefore, for Taxpayers – Per diem is not tax-free by name. It is tax-free only where the facts and the paperwork support it. Documentation is everything.