TDS on Audit Fees

This query is : Resolved

Ramawatar Joshi (Querist)
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19 April 2008 Generally Audit Fees is decided by the Board of Directors in consultation with the Auditors at the time of finalization of accounts, which mostly are done in August. Provision for the same is made in the previous year for which TDS is required to be paid in May and Return is required to be filed in June. Generally it is very difficult on or before end of May to finalize amount of Audit Fees and sometime even name of Auditors. There may be some instances where amount of Audit fees differs or Auditors may change like:

a) Statutory Auditors were appointed as Tax Auditors after end of May.
b) Other Chartered Accountant is appointed as Tax Auditors instead of Statutory Auditors in earlier year.
c) Auditors resigned or otherwise termination of assignment and another Auditor is appointed.
d) Merger/ Demerger of Audit Firms takes place.

In these types of cases it is difficult to pay the TDS on Audit Fees on or before end of May, file TDS Return and issue TDS Certificate before end of June. TDS certificate is required to be handed over to the deductee within 7th June i.e. TDS Certificate is to be handed over before completion of assignment and payment.

In these circumstances what should be the date for deduction and payment of TDS -- 31st March and 31st May or within 7th day of following month in which accounts are finalized.

If dates are 31st March and 31st May there is a genuine reason to relax the provisions in this regard.

CA SHARAD SINHA

CA SHARAD SINHA (Expert)
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21 April 2008 I THINK YOUR APPROACH TO THE PROBLEM IS NOT CORRECT. THE FACT THAT THE FEES IS FINALISED AFTER COMPLETION OF THE AUDIT OR FOR THAT MATTER TAX AUDITOR COULD BE OTHER THAN THAT OF STATUTORY AUDITOR., THE FACT REMAINS THAT THE ACCOUNTING COMES FIRST. i.e.,YOU HAVE TO PROVIDE A PROBABLE COST IN THE BOOKS FOR AUDIT FEE , BE IT STAT AUDIT OR TAX AUDIT .THE TDS THUS CAN BE MADE ON SUCH PROVIDED AUDIT FEE. IN CASE THE ACTUALS ARE DIFFERENT THAN THE ONE PROVIDED , EITHER IT CAN BE ACCOUNTED AS PRIOR PERIOD ITEM IN THE NEXT FISCAL & THUS TDS REMITTED AS PERIOD COST OR TDS ON SUCH EXCESS AUDIT FEE CAN SUFFER DIS ALLOWNACE U/S 40 a FOR THE PREVIOS YEAR AND THE SAME CAN BE CLAIMED AS ALLOWABLE EXPENSE STHE NEXT YEAR.

HENCE TDS COMPLIANCE DOES NOT COME IN WAY IN THE PROCESS.