TDS on advance payment to professionals

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Querist : Anonymous

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Querist : Anonymous (Querist)
14 March 2011 Dear sir,

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?

Please clarify sir,
Thanks in advance...
swakar.

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.

14 March 2011 TDS is deducted on the date of credit or payment whichever is earlier.

In your case TDS should be deducted on payment date on actual paymenet of Rs. 4 lacs. No need to add service tax for TDS deduction.




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