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

Aashok Kumar Sharma (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):

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### 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**.

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### 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.

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### 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.

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### 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 |

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### **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).**

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

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