Does gross receipts include reimbursement paid by client

Technically yes, because these expenses you incurred have nothing to do with your profession.

But it is not income right..does it needs to be taxed?

It is income and not a reimbursement because you spent the money on things unrelated to your job as a tech consultant. And this original expenditure is not deductible anyway.

So if it is related job (business meetings or conferences) then also will it be taxable for me?

My client is foreign entity. All invoices are raised in USD and complete amount hits my Indian bank account in USD converted to INR.

Although 50% is considered as expense but actually the above one is not my expense at all.

You started by saying the reimbursements were clearly non-business and holiday related. This is obviously an income, any way you look at it.

However, if you are able to present it differently, e.g. you spent Rs 500000 out of your pocket for work related travel and against that you were reimbursed Rs 350000 by this client - then you might be able to make it work. Effectively your gross receipts will remain the same and against that your expenses will change. 

If this has any impact on your actual taxable income will of course depend on the income expense figures.

So, let me put you another way.

They are a foreign entity and they don't have  corporate presence here in India. So they reimburse all the bills related to work such as laptops, business travels( india and abroad), furniture etc. Once the contract is over they will completely deduct (assets cost only) it from final invoice which I raise at the end of the term.

In this case along with my monthly invoice I also included reimbersments if any on that particular month.

So as per you, I need to consider all what I receive as income. 

Ex: 35 lakh tech consultancy fee. 5 lakh reimbersments. Gross receipts =40lakhs

Taxable: 20 lakhs as per 44ADA

Am I correct?

No - that's not what I meant.

I was simply trying to explain that "reimbursements" when they are clearly unrelated to an expense related to the business / profession are obviously an income.

However, there are ways to get around that, to an extent.

To be safe, generate two invoices every period : one for your actual fees and one for the reimbursements you are claiming.

Then, once the money is received, adjust the receipt against these separate invoices.

Eg: Invoice 1 for fees of Rs 3,00,000 and Invoice A for reimbursement of Rs 1,00,000. When you get the payment of Rs 4,00,000 adjust is against each of the invoices.

Of course, in the end, the total amount of the reimbursements you receive should not be more than your actual expenditure. 

Ok got it. Now only those invoices which contain my tech consultancy fees forms the gross receipts.

Eg:

Income
Fees - Rs 20,00,000

Expenses
Bla bla bla - Rs 5,00,000
Business Travel - Rs 8,00,000

And if you get reimbursed for the travel of Rs 1,00,000, then:

Expenses
Bla bla bla - Rs 5,00,000
Business Travel - Rs 7,00,000

But if you get reimbursement of Rs 11,00,000 for the travel then:

Expenses
Bla bla bla - Rs 5,00,000
Business Travel - Rs -3,00,000

This means your income increased by Rs 3,00,000 because you were reimbursed more than you actually spent.

It's all about how you present it. For standard tax calculations, this level of detail will be required. But for for 44ADA, I would suggest keeping the supporting documents / calculations with you just in case, but to provide only the bare minimum information in the tax returns.

Ordinarily all this would not be an issue but since you're collecting the payments from outside India, it's better to keep the income and reimbursement parts separate. Does your bank ask you to provide a reason for the inward remittance? 

Yes, every month I provide FEMA and Authorization letter along with invoice. The FEMA letter has a purpose code from RBI for software consultation P8002