Hi, please guide on the below.
I provide IT services to a client outside India and I declare my income under Section 44ADA in my ITR.
The client asked me to purchase some assets from India like Laptop, Screen, etc. on their behalf to get the work done. They reimbursed the entire amount to me.
Although, in future, whenever the contract ends, I’ll have to return back all the assets I purchased to the client as they own it. The same clause is written in my contract as well.
In this case, do I still have to consider the reimbursed amount as an income and get it classified as taxable OR will this be a pure reimbursement and should NOT be taxable as the assets are owned by the client itself and not me?
Pass-through reimbursements for client-owned asset outlays can avoid inclusion in taxable receipts under Section 44ADA if documented If the payments merely reimburse outlays for client-owned assets and the contract and records clearly show the provider acted as agent/nominee with no markup or profit, those amounts can be treated as pass-through reimbursements rather than business income and need not be included in taxable receipts under Section 44ADA. To support that position maintain the contract clause on ownership, original supplier invoices, separate accounting entries, and evidence of reimbursement without margin. Absent clear documentation or if the provider benefits economically (markup, retention, or inconsistent accounting), the amounts risk being treated as taxable receipts; seek professional tax advice. (AI Summary)
TaxTMI 
TaxTMI 
