TaxTMI 
TaxTMI 
Tax on Reimbursement from Client
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....ax on Reimbursement from Client<br> Query (Issue) Started By: - Shrey Shah Dated:- 18-8-2025 Last Reply Date:- 19-12-2025 Income Tax<br>Got 1 Reply<br>Income Tax<br>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....
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.... 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 shou....
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....ld NOT be taxable as the assets are owned by the client itself and not me? Reply By Ryan Vaz: The Reply: Applicable Law / Judicial & Statutory Basis * Section 4 & Section 5 - Income-tax Act, 1961 Tax is chargeable only on "income". A pure reimbursement without profit element is not income. * Section 28 - Profits and Gains of Business or Profession Only receipts having the character of....
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.... income are taxable. * Section 44ADA - Presumptive taxation for specified professionals * Presumptive income = 50% of gross receipts * "Gross receipts" must be receipts arising from rendering professional services, not capital advances or reimbursements. * CBDT Circular No. 715 dated 08-08-1995 (Q.30) Clarifies that pure reimbursements, with no markup or profit element, do not fo....
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....rm part of income. * Judicial Principle (consistent case law) Courts have repeatedly held that reimbursement of actual expenses incurred on behalf of the client, supported by evidence and with no element of profit, is not taxable income (e.g., CIT v. Siemens Aktiongesellschaft - 2008 (11) TMI 74 - BOMBAY HIGH COURT, Bombay HC). Short Practical Answer ? No, the reimbursed amount should....
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.... NOT be treated as taxable income, provided it is a pure reimbursement and not part of your professional fee, and the ownership of assets vests with the client. Accordingly, such reimbursement should also be excluded from "gross receipts" for Section 44ADA.<br> Discussion Forum - Knowledge Sharing ....