Tds on reimbursement on transportation

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Govind Parik (Querist)
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26 March 2018 Kindly inform us on following

We are making job work of another company and raising the Invoice of
Jobwork to the party and they are making the payment of Job work
charges after deducting the amount of TDS. u/s 143

The material is supplied by the party from their supplier directly to us
and payment to supplier is made by them. Since the material is received
by us we are making the payment to transporter and get it reimbursed from
our party for whom we are making job work.

Now they have deducting the TDS on reimbursement of Transportation U/s143

The transportation charges paid by us below the basic limit and one
transaction is below Rs.20,000/- and we don't paid one transportation
Rs.75,000/- in a year.

our question is how the party is deducting the tds on reimbursement and
they have saying that us to provide any section where it is mention that
not to deduct the TDS on reimbursement of Transportation

You are requested to kindly provide us the details so as to not to
deduct the TDS on reimbursement of Transportation.

Sandeep Dharar

Sandeep Dharar (Expert)
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26 March 2018 First of all there is no section under which TDS is deducted as mentioned by u "143". Now the 2nd thing is TDS is not deducted on any kind of reimbursement(s)(irrespective of the amount). TDS on transportation is deducted u/s 194C (with certain terms and conditions) visit the following link for that:-

https://taxguru.in/income-tax/tds-payment-contractors-section-194c.html

Since you are not transporters and getting only reimbursement for freight charges paid by u, hence ur Debtors can't deduct TDS from ur reimbursement bill.

Govind Parik

Govind Parik (Querist)
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28 March 2018 Dear Sir,

The party is not accepting and they are saying that it should be deducted and they are saying that where it is noted in act that it should not be deducted on reimbursement . and they are deducted TDS on Freight u/s 143.

You have any legal wording please provide us.
So as to prove us that they are deducing TDS is wrong.

Since we are getting very tough to convince them.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Got it, this is a common area of confusion. Here's a clear explanation and legal reasoning you can share with your party to prove that **TDS should not be deducted on reimbursement of transportation charges**:

---

### 1. **Section 143 of Income Tax Act**:

* **No such section exists for TDS deduction on transportation or any other payment.**
* Possibly, your party is mistaken about the section number. The correct section for TDS on transportation/contractor payments is **Section 194C**.

---

### 2. **TDS on Transportation Charges u/s 194C**:

* Section 194C requires TDS deduction on payments made to a **contractor/transport service provider**.
* But **TDS is deductible only when the payment is made to the actual transporter (contractor)** who performed the service.

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### 3. **Reimbursement is NOT a payment to contractor**:

* When you pay the transporter and **recover the amount as reimbursement from your party**, you are only passing on the expense you incurred.
* This is **not a payment for services rendered by you**, but a recovery of cost.
* **Hence, TDS should be deducted only at the time of payment to the actual transporter, not on your reimbursement from the party**.

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### 4. **Legal and practical standpoint**:

* The Income Tax Act **does not specifically mention reimbursements** but TDS provisions apply to payments for services or contracts.
* Reimbursement is not a separate contract or service rendered by you, so **TDS is not applicable on reimbursements**.
* Many expert opinions, circulars, and judicial pronouncements support this view.

---

### 5. **Reference for your party:**

* You can refer them to [this detailed article on TaxGuru](https://taxguru.in/income-tax/tds-payment-contractors-section194c.html) explaining TDS on contractors and clarifying that reimbursements do not attract TDS.
* Also, you can say that if the party insists, they should refer to the Income Tax Department’s TDS manual or seek professional tax advice.

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### 6. **Summary for your party:**

| Payment made to | TDS Applicable? | Reason |
| ---------------------------- | ---------------------- | ----------------------------------------- |
| Transporter (contractor) | Yes, if conditions met | Actual payment for service under Sec 194C |
| Your company (reimbursement) | No | Recovery of cost, not payment for service |

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If you want, I can draft a formal letter/email you can send to your party explaining this clearly with references.

Would you like me to help with that?

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