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Reimbursement of expenses

In case of reimbursement of expenses paid on behalf of any other person in the course of business/profession , it is advisable to issue an independent invoice for the amount to be reimbursed. According to question number 30 in Circular No 715, dated 8.8.1995 issued by CBDT, it was clarified that if the invoice is for a consolidated amount, then the tax must be withheld on the total invoice value.

It has been clarified that the tax components like service tax, GST, is excluded from the scope of tax deduction if shown separately in the invoice. This was a highly litigated issue before the CBDT clarified the matter vide Circular 1/2014 dated 13.01.2014 and Circular 23/2017 dated 19.07.2017.

Nil or lower deduction of TDS

Assessees, based on their income, have an option to apply for lower or nil deduction of tax at source under section 197. Such assessees must submit an application online to the assessing authority in Form 13. Based on the income, the assessing officer determines the rate applicable. Such certificate must be produced in original