Tds on reimbursement

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 April 2012 Whether tax is required to be deducted u/s 194C if separate bill is issued for reimbursement of expenditure relating to it.

Yogesh Agarwal

Yogesh Agarwal (Expert)
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19 April 2012 Yes TDS is required to be deducted on re-imbursement under section 194C..

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Durgesh Laddha

Durgesh Laddha (Expert)
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19 April 2012 Every thing depends on nature of exp. and work. Example : Carpenter doing some work and he issue separate bill for wood, then you should not deduct tds on wood, you should deduct TDS on labour bill only.

If you want, plz tell me actual case.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 April 2012 ok sir
Actually on the bill of reimbursement "agency charges" is written. I'll go in further detail and will inform you whole case.
Thanks

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 This is a classic situation where the **nature of the expense** determines whether TDS applies on reimbursement. Here's a quick guide:

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### Key principle:

* **TDS is applicable only on the *nature of service* or *work* provided, not on pure reimbursement of cost components like materials or out-of-pocket expenses.**

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### Applying that here:

* If the **bill clearly separates "agency charges" (service)** and **"reimbursement" (expenses incurred on your behalf, e.g., printing, courier, travel)**, then:

* **TDS should be deducted only on the agency charges (service part) under the appropriate section (e.g., 194C, 194J)**
* **No TDS is deducted on the reimbursement amount**, since it is a pass-through expense.

* If the bill **does not separate charges and reimbursement**, and is a lump sum, then the entire amount is liable for TDS.

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### Example:

| Description | Amount | TDS Applicability |
| ----------------------------- | ---------- | ----------------- |
| Agency Charges (service) | Rs. 10,000 | Deduct TDS |
| Reimbursement (printing cost) | Rs. 5,000 | No TDS |

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### What if separate bill issued for reimbursement?

* If the vendor issues **a separate bill or invoice for reimbursement of expenses** without any markup, **TDS is generally not deductible on that reimbursement bill**.

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### Your case (agency charges + reimbursement):

* Since the bill mentions **agency charges**, ask for **separate invoices** for agency service and reimbursement expenses.
* Deduct TDS on **agency charges only**.
* No TDS on reimbursement.

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If you share the full case or bills, I can help you confirm exactly how to treat the amounts! Would you like to?

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