Query:
Should TDS be deducted on reimbursement expenses along with professional fees?
Solution:
Let’s understand with the help of an example, CA Rohit is a practicing Chartered Accountant who is providing professional services to a private company. Mr. Rohit issues monthly bills to this company. While raising the invoice, Rohit charges fees and outlays i.e., fees along with expenses. The client comes to Rohit to understand whether it will deduct TDS on expenses or not?
As per the provisions of section 194J, TDS is to be deducted on the professional fee paid, and expenses recovered are cost-to-cost recoveries for traveling and other similar expenses. Thus, the company is not required to deduct TDS on the expenses or outlays.
Example:
| Particulars | Amount (in Rs.) |
| Professional Fee for the month | 50,000 |
| Add: Other Charges (like Travelling, Food, etc) | 3,000 |
| Total Invoice Value* | 53,000 |
*GST has not been considered, to make it simple, straight, and easy to understand.
In the above case, the Client has to deduct the TDS @ 10% on Rs. 50,000 only.
Therefore, the amount payable to the CA Rohit would be:
| Particulars | Amount (in Rs.) |
| Professional Fee | 50,000 |
| Add: Other Charges (like Travelling, Food, etc) | 3,000 |
| Less: TDS on Professional Services u/s 194J @ 10% | (5,000) |
| Total Payable net of TDS | 48,000 |
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