Journal Entry for Incentive and TDS

This query is : Resolved

Sonal Kulshreshtha (Querist)
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23 April 2010 In 2008-09, the expense for incentive was booked as Incentive A/c DR. 150000
To Incentive Payable A/c 150000

The payment of incentive is made in April 2010 and the entry made is -

1.Incentive Payable Dr. 150000
TO TDS Payable A/c 45000
TO Amount Payable a/c 105000

2. Amount Payable A/c 105000
To Bank 105000

Is this journal entry correct?

CA Sanat Pyne

CA Sanat Pyne (Expert)
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23 April 2010 no
tds to be deducted at the time of payment or at the time of accounted for , whichever is earlier.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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23 April 2010 If the incentive is in relation to salary then TDS on salary u/s 192 is deductible at the time of payment of salary and not at the time of accrual. Though the journal entries as submitted are correct TDS need not be deducted at the time of accrual of incentive related to salary and should be deducted at the time of payment of salary.

If TDS already deducted and paid then nothing can be done now and entries as per above is correct.

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Sonal Kulshreshtha

Sonal Kulshreshtha (Querist)
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23 April 2010 So the entry should be

Incentive Payable Dr.
To Amount Payable

And at time of actual payment the entry should be

Amount Payable Dr.
TO TDS Payable
TO Bank

Aditya Maheshwari

Aditya Maheshwari (Expert)
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24 April 2010 Yes if it is in relation to salary only