My question in, is it required to deduct TDS on advance amount paid at the time of contract/service agreement with contractor or professionals.
Suppose, if we entered a service agreement with a legal professional, value Rs.10,00,000-00, as per agreement it is compulsory to pay advance 40% of 10 lacs, i.e4,00,000-00.
Is it compulsory to deduct TDS on advance payment of 4 lakhs?
If yes, we should add service tax 10.3% to 4 lacs advance payment while deducting TDS?
14 March 2011
Q1 > yes. Its mandatory to deduct TDS at the time of payment or credit to party, whichever is earlier.
Q2> NO. Service tax is not to be added on the payment as at the time of making advance payment, you are not booking the expense & hence you are not levying any service tax. So, tds on the advance payment only should be deducted.