TDS on reimbursement of expenses

Dear Rachna,

Generaly If reimbursement of expenses are claimed through a separate invoice then they dont attract TDS. However in case of consolidated invoice/bill TDS is to be deducted on the Gross amount inclusive of reimbursements..

Reason of above is this question from the Boards Circular -

Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses ?

Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.

The following case may be useful to you -

Payment made to advertising agencies or agents for rendering professional services are not covered by section 194C - Madras Bar Association v. CBDT [1995] 216 ITR 240 (Mad.).

Now coimg to the professional - Yes, he would be liable for not deducting TDS.