TDS on Reimbursement of Exp
This query is : Resolved
30 October 2009
Dear All,
Pls let me know with reasoning whether Tds is deductible in case we reimburse any Exp.
Eg: Freight Exp.
Even in case of Reimbursement?
But Sir, here were does the contract for frieght exist between us and our vendor? Just the party has raised debit note on us for the same.Pls can you explain me from where does the provision of TDS becomes applicable in such case?
Pls let me make the case more clear.
The vendor has supplied us some material and freight exp in relation to the same is reimbursed by us to our vendor who in turn will pay the same to transport Co.
But here our vendor is sending us material, and we are paying them freight which they will pass on to transport co.
Pls let me know with reasoning whether Tds is deductible in case we reimburse any Exp.
Eg: Freight Exp.
Even in case of Reimbursement?
But Sir, here were does the contract for frieght exist between us and our vendor? Just the party has raised debit note on us for the same.Pls can you explain me from where does the provision of TDS becomes applicable in such case?
Pls let me make the case more clear.
The vendor has supplied us some material and freight exp in relation to the same is reimbursed by us to our vendor who in turn will pay the same to transport Co.
But here our vendor is sending us material, and we are paying them freight which they will pass on to transport co.
30 October 2009
Yes TDS is applicable whenever you pay freight U/s 94C.
Regards
Regards
30 October 2009
Even in case of reimbursement?
30 October 2009
Yes dear tds is applicable even in case of reimb. if covered under the provisions.
30 October 2009
?
30 October 2009
According to section 194C Tds is need to be deducted when payment made to a resident contractor in respect of any work done.
The term work includes inter alia carriage of goods and passengers by any mode of transport, other than railways
Next question is who makes the payment if the person the paying the amount to the contractor is Individual or HUF,AOP or BOI these persons must be TAX audit assessees (44AB) in the preceding previous year.
Other cases TDS need to be deducted.
The term work includes inter alia carriage of goods and passengers by any mode of transport, other than railways
Next question is who makes the payment if the person the paying the amount to the contractor is Individual or HUF,AOP or BOI these persons must be TAX audit assessees (44AB) in the preceding previous year.
Other cases TDS need to be deducted.
30 October 2009
?
27 July 2025
This is a common confusion regarding **TDS on reimbursement of expenses**, especially freight or transport charges passed through by a vendor.
Here’s a clear explanation based on your scenario:
---
### Scenario Recap:
* Vendor supplies material to you.
* Vendor incurs freight charges from transport company.
* Vendor bills you material cost + freight cost (reimbursement).
* You pay vendor for both.
---
### TDS Applicability under Section 194C (Payment to Contractor):
* **Section 194C applies to payments to contractors for any work done, including carriage of goods (freight).**
* When freight is paid **directly to the transporter**, TDS on freight applies if the payer is liable (e.g., individual/HUF with tax audit or companies).
* But what if the freight is **reimbursed to your vendor** who will pay the transporter?
---
### Key Points:
1. **If your vendor is charging freight as a *reimbursement* (pass-through),** and **not adding any markup or service on it**, then:
* You are **effectively paying the freight cost to the vendor**.
* Since your vendor is responsible for paying the transporter, and you pay freight cost to vendor, **TDS is applicable on the freight amount under Section 194C** on the vendor.
2. **If your vendor charges freight as a *part of contract work* (with or without markup),** then entire freight amount is considered part of contract payment, and **TDS applies**.
3. **You should deduct TDS on the total amount paid to the vendor**, including freight, unless freight is separately reimbursed with a supporting invoice.
4. **If freight amount is clearly separated and reimbursed with no markup and with proper supporting bills from transporter, some argue that TDS may not be required on the reimbursement portion**, but generally tax authorities treat this as part of contract payment subject to TDS.
---
### In short:
* **Yes, TDS under Section 194C is applicable on freight payments made via your vendor (reimbursed freight) if the vendor is supplying goods + carriage and charging freight to you.**
* The vendor is receiving freight charges from you, so TDS applies on that amount to the vendor.
---
### Practical advice:
* To avoid confusion, ask your vendor to provide separate invoices:
* Material cost invoice.
* Freight invoice from transporter.
* Deduct TDS on the whole invoice amount or at least on the freight amount as per Section 194C.
* Keep proper documentation for audit.
---
If you want, I can help draft an example TDS entry or TDS deduction process for this. Would that be useful?
Here’s a clear explanation based on your scenario:
---
### Scenario Recap:
* Vendor supplies material to you.
* Vendor incurs freight charges from transport company.
* Vendor bills you material cost + freight cost (reimbursement).
* You pay vendor for both.
---
### TDS Applicability under Section 194C (Payment to Contractor):
* **Section 194C applies to payments to contractors for any work done, including carriage of goods (freight).**
* When freight is paid **directly to the transporter**, TDS on freight applies if the payer is liable (e.g., individual/HUF with tax audit or companies).
* But what if the freight is **reimbursed to your vendor** who will pay the transporter?
---
### Key Points:
1. **If your vendor is charging freight as a *reimbursement* (pass-through),** and **not adding any markup or service on it**, then:
* You are **effectively paying the freight cost to the vendor**.
* Since your vendor is responsible for paying the transporter, and you pay freight cost to vendor, **TDS is applicable on the freight amount under Section 194C** on the vendor.
2. **If your vendor charges freight as a *part of contract work* (with or without markup),** then entire freight amount is considered part of contract payment, and **TDS applies**.
3. **You should deduct TDS on the total amount paid to the vendor**, including freight, unless freight is separately reimbursed with a supporting invoice.
4. **If freight amount is clearly separated and reimbursed with no markup and with proper supporting bills from transporter, some argue that TDS may not be required on the reimbursement portion**, but generally tax authorities treat this as part of contract payment subject to TDS.
---
### In short:
* **Yes, TDS under Section 194C is applicable on freight payments made via your vendor (reimbursed freight) if the vendor is supplying goods + carriage and charging freight to you.**
* The vendor is receiving freight charges from you, so TDS applies on that amount to the vendor.
---
### Practical advice:
* To avoid confusion, ask your vendor to provide separate invoices:
* Material cost invoice.
* Freight invoice from transporter.
* Deduct TDS on the whole invoice amount or at least on the freight amount as per Section 194C.
* Keep proper documentation for audit.
---
If you want, I can help draft an example TDS entry or TDS deduction process for this. Would that be useful?
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