In many companies, directors or senior personnel often incur expenses on behalf of the organization including hotel bills during business travel. These are later reimbursed by the company. But such situations raise a critical compliance question:
Does the company need to deduct TDS when reimbursing such hotel expenses?
The answer depends on several factors, especially:
This blog clarifies the TDS applicability on reimbursements, based on legal thresholds and audit-safe interpretations — using a real ₹97,800 case to illustrate.
If the hotel invoice is in the director’s personal name, and the director has merely incurred the expense personally and is getting it reimbursed, then the company is not liable to deduct TDS.
This is because the company is not a party to the contract with the hotel it’s a pure reimbursement, not a payment for a service availed directly by the company.
Important: Proper documentation must still be maintained including invoices, reimbursement slips, and board approvals, to avoid ambiguity during audits.
TDS is mandatory when:
Under Section 194C of the Income Tax Act, TDS must be deducted if:
This applies even if the initial payment was made by the director, and the company is only reimbursing.
A director of a consulting firm traveled to Delhi for a client engagement. He booked and paid for a hotel stay, amounting to ₹97,800, and submitted the invoice for reimbursement.
Since the amount exceeded the ₹30,000 threshold, TDS was applicable under Section 194C.
Ebizfiling’s advisory to the client:
Note: If the hotel vendor were an individual or HUF, TDS would apply at 1%. For long-term corporate arrangements, Section 194I (Rent) may apply instead typically at 10%.
When a company provides a fixed allowance (e.g., ₹20,000/month for travel) without requiring actual invoices, it is treated as part of the salary or perquisite. In that case:
However, when actual bills are submitted and reimbursed, TDS rules under Sections 194C or 194I may apply based on invoice details.
Failure to deduct TDS on such reimbursements can lead to:
This blog has been prepared by the compliance team at Ebizfiling India Pvt. Ltd., based on real advisory experience and interpretation of Sections 194C, 194I, and 40(a)(ia) of the Income Tax Act. It reflects applicable thresholds and practices as of FY 2025–26.
A ₹97,800 hotel invoice reimbursed to a director may seem like a routine transaction but if it’s in the company’s name, the TDS obligation cannot be ignored. Knowing when and how to deduct can save companies from tax disallowances, interest, and penalties.
Our team at Ebizfiling can:
Call: +91 9643203209
Email: info@ebizfiling.com
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No, if the director paid personally and is being reimbursed, TDS is not applicable.
TDS applies if the payment exceeds ₹30,000 in a single instance or ₹1,00,000 annually.
Typically under Section 194C for contractors or service providers.
2% for partnership firms and companies; 1% for individuals or HUFs.
No, allowances are taxed under salary provisions, not subject to Section 194C.
Yes, under Section 40(a)(ia), the expense may be disallowed, and interest/penalties may apply.
TDS becomes applicable even if individual payments are below ₹30,000.
No, TDS must be deducted before processing the reimbursement payment.
Yes, TDS applies if the invoice is in the company’s name and thresholds are met.
Yes, TDS applicability is based on amount and contract, not GST status.
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