Tds on expenses

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 May 2012 Hello Friends,
If Company A is raising Invoice on Company B For Reimbursement of Electricity Charges at the rate higher than normal rate then will the TDS needs to be deducted. The Relationship Between Company A and Company B is That of Lessor and Lessee ie. Company A is Lessor and Company B is Lessee.
Reply ASAP...
Thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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03 June 2012 Reimbursement means payment of the amount what has been paid on your behalf. If any thing extra is being paid then it is not called a Reimbursement.
.
Why & to Whom such extra amount is being paid???
.
Considering the fact, the entire payment can be considered as the lease rentals with the modified terms of supply of electricity
by the lessor.
.
Lease Rentals+ Payment for Electricity Charges , thus becomes a composite payment liable for TDS in terms of the Lease.
.

Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2012 Is it that if the reimbursement is at actuals then no TDS is to be deducted ???

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 Here's a clear breakdown of your query about **TDS on reimbursement of electricity charges** where Company A (lessor) is invoicing Company B (lessee):

---

### 1. **Is TDS deductible on Reimbursement of Electricity Charges?**

* **If it is a genuine reimbursement** (i.e., Company A is simply passing on the **exact amount** of electricity charges it has paid to a third party on behalf of Company B), then **TDS is generally NOT deductible** on such reimbursements because it’s just a recovery of expenses, not income.

* However, **if Company A charges a higher rate than the actual electricity cost or adds any markup/profit on it**, then it is considered as a **payment for services or supply** and **TDS may be applicable**.

---

### 2. **If the reimbursement amount is higher than normal rate**

* When Company A raises invoice for electricity charges at a **rate higher than the actual cost**, the **excess amount** may be treated as **rent or service charges**.
* This can attract **TDS under Section 194-I (Rent)** or **Section 194C/194J (Contract or professional fees)** depending on the nature of services involved.

---

### 3. **Relationship between Lessor and Lessee**

* If Company A is the **lessor** and Company B is the **lessee**, and the lease agreement includes **payment for electricity consumption**, then the whole amount (rent + electricity charges) might be considered as **rent**.
* Hence, **TDS under Section 194-I** (Rent) could apply if the total amount exceeds the threshold of ₹1,80,000 in a financial year.

---

### 4. **Summary**

| Scenario | TDS Applicability | Section |
| ----------------------------------------------- | ------------------------------------------------ | -------------------------------------- |
| Exact reimbursement of electricity charges | No TDS deductible | N/A |
| Charging electricity at higher than actual cost | TDS applicable on excess or total amount | 194-I (Rent) or others based on nature |
| Lease agreement covering electricity charges | TDS on total amount as rent if threshold crossed | 194-I |

---

### **Final advice:**

* **If it’s a pure reimbursement at actual cost → no TDS.**
* **If any markup or higher rates charged → TDS applicable (likely under Section 194-I).**

---

Let me know if you want help drafting the TDS entries or further clarifications!

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