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TDS on Expenses reimbursment

Shankar G (Assistant Manger Finance) (94 Points)

11 May 2010

Hi - We are paying expenses on reimbursement to our Lawyers for the service rendered to us, however they have not provided any supporting document to us (Amount already agreed by us). While paying those amount, whether we need to deduct TDS or not ?

Regards,

Shankar G

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5 Replies

vikash rathi (Chartered Accountant) (787 Points)
Replied 11 May 2010

yes u have to deduct tds......as it is also part of fees....

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Shankar G (Assistant Manger Finance) (94 Points)
Replied 11 May 2010

Thanks for your reply... However ,Lawyers incurring expenses on his boarding, lodging, coveyance and other expenses for the project assigned by us. In such a case, if we deduct TDS, he will get a less amount compared as he spent. In additon, he is arguing not to dedut TDS on those expenses. Can I have any specific Notification or Circular or section for this type of case.

Regards

Shankar G

Rachit (Analyst) (913 Points)
Replied 12 May 2010

No TDS is required to be deducted on re-imbursement of expenses unless the same forms part of one consolidated bill for professional fees.

In order to avoid TDS on re-imb of expenses, take 2 separate bills from your lawyer : one for professional fees and other for out of pocket expenses. This bill for out of pocket expenses is sufficient enough for you to claim it as an expense. No need of any supporting documents / bills for the same

Shankar G (Assistant Manger Finance) (94 Points)
Replied 12 May 2010

If we are not deducing TDS on expenses reimbursment (Without Bill case), the assessing officer may argue that the amount might be pertains to part of professional fees of the lawyer, so the company need to pay TDS along with Penaly and interest since we donot have any records to prove it pertains actual reimbursment.

Regards

Shankar G

Rachit (Analyst) (913 Points)
Replied 12 May 2010

Request the lawyer for a bill or take a Receipt from him stating that he has received this amount vide cheque no;... (details of payment) as reimb. of his out of pocket expenses.