TDS on reimbursement of Rent Expenses

This query is : Resolved

derastra (Querist)
Follow

16 December 2009 I am having a query. If a depository pays rent on behalf of a company to NCDEX and later asks for reimbursement. The depository is asking not to deduct TDS while making the payment to them and issuing a debit note to the company.Is it required for the company to deduct TDS u/s 194-I on such reimbursement or not. Similarly I wish to be clarified on the matter that - are reimbursement of expenses subject to TDS under other sections.

M Prabhakar Menon

M Prabhakar Menon (Expert)
Follow

16 December 2009 The depository is an intermediary you cannot apply TDS on them TDS is to be deducted on rent paid to NCDEX send the note to NCDEX and collect the TDS

derastra

derastra (Querist)
Follow

16 December 2009 But the company has to make the payment to the intermediary. In such a case, how can the company collect TDS from NCDEX?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

27 July 2025 Here’s the clarification on **TDS on reimbursement of rent expenses** in your scenario:

---

### Situation:

* The **Depository** pays rent to NCDEX on behalf of your company.
* Then the Depository asks your company to reimburse that rent amount (issues a debit note).
* Your company wants to know if it should deduct TDS under **Section 194-I** on the reimbursement payment to the Depository.

---

### Key points:

1. **TDS under Section 194-I (Rent)** applies only on the payment made **to the actual owner/lessor of the property** — here, that’s **NCDEX**.

2. The **Depository is an intermediary** who only paid the rent on your behalf and now wants reimbursement.

3. **Reimbursement to the Depository is just recovery of expenses** — it’s **not a rent payment**.

4. Therefore, your company **should not deduct TDS while reimbursing the Depository**.

5. Instead, the **Depository should have deducted TDS while paying rent to NCDEX** (or NCDEX should have deducted TDS if applicable).

6. Since your company has no direct payment to NCDEX, it should ask the Depository to provide proof of TDS deduction or get a certificate from NCDEX.

---

### What about TDS on reimbursement under other sections?

* Generally, **reimbursement of expenses is not subject to TDS** if billed separately and without any markup or service.

* If the intermediary (Depository) provides a **consolidated invoice** including service charges + reimbursement, TDS might apply on the entire amount under appropriate sections.

---

### Summary for your case:

| Payment made to | TDS applicable? | Remarks |
| ------------------- | ----------------- | ---------------------------------- |
| NCDEX (rent) | Yes (under 194-I) | Rent payment attracts TDS |
| Depository (reimb.) | No | Just recovery of rent paid by them |

---

### Practical recommendation:

* Request the Depository to provide TDS proof for the rent paid to NCDEX.

* If the Depository didn’t deduct TDS, your company may ask Depository to do so or arrange to pay TDS directly to NCDEX as per provisions.

---

If you want, I can help draft communication or accounting entries for this situation. Let me know!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now