TDS on Employee Reimbursement

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This discussion clarifies whether a company must deduct Tax Deducted at Source (TDS) on reimbursements made to employees for business expenses. The consensus is that TDS is not applicable on the reimbursement itself, as it's considered the company's expenditure. However, TDS should be deducted on payments made by the employee to third-party vendors, such as labour contractors, with the company responsible for remittance.

Ravi Konda

Ravi Konda (Querist)
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01 December 2023 Dear all,

Our company gives advance to the employee to meet expenses incurred at the branch.
Nature of the transaction includes fix payment to labour contractor,rent ,electricity ,water,food ,stationery purchase,internet service ,mobile expenses etc..

Post payment employee prepares a voucher and sends the same to HO for accounting against advance payment.

Some of the expenses attract TDS as well.

Now my question is, Do we as a company need to deduct TDS on such reimbursement?

Regards,
Ravi Konda

RAJA P M

RAJA P M (Expert)
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01 December 2023 No, TDS not deductible for the said transaction through employee. it's purely for company's expenditure. So, TDS not applicable to the employee.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 December 2023 TDS need to be deducted on the payment to the contractor by the employee. Advice him properly to deduct TDS and TDS remittance can be made by the company.

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