Mr. Praveen, this is not the issue in question at all.  What we are trying convince/get convinced is whether income tax of proprietor can be debited to capital account and entries to be made subsequent to receipt of refund.  One has to find out various alternatives for single transaction for effective understanding of the concepts. 

I was never in disagreement with you.  I was just trying to explain that there is no bar neither it is incorrect to debit Excess TDS (as explained by you) to the Capital Account.  Hope the none were wrong.

I agree with Mr. Ramanju & Mr. Praveen.....

Entry will be -

Bank A/c..............................Dr.

TDS Receivable A/c.............Cr.

Generally, in Proprietary concern also, in case of excess of Tax paid over liability, TDS Recivable A/c. is credited..... and hence, ultimately at the time of refund, the same shall be debited.

TDS  will be a debit balance and will be credited on receipt and not vice versa. 

Please guide me why I am wrong.  Since return is filed for individual and not for proprietory concern, what is wrong is debiting the TDS receivable to capital account. Thereafter the same will be shown as TDS receivable in Balance Sheet of Individual and not proprietory concern. 

Please help me out.

Hi Dharmaraju,

Nobody is saying that ur wrong. It is depend on Individual's practice. Somebody may account it by debiting to Capital A/c. OR somebody may show it as an asset in B/S.....

Logic is simple - to reverse the A/c. which is accounted prior. No matter whether it is Capital A/c. or TDS Receivable A/c.

Hi All Thanks for the feedback

I have debited the TDS receivable for all TDS deducted which is in excess of our IT liability. IT liability is provided in the year end.

When I receive the refund if I credit TDS receivable due to which I have excess paid, how do we adjust the IT liability provided and appearing in the B/s. Should I pass an adjusting entry for the balancing figure by cr. TDS receivable and Dr. IT provision assuming that the assessment is complete when refund is received?

Please confirm.

I was referring to those who had said that it was wrong.  I have never said that mine is only correct method and was referring to various alternatives that can be followed.  Thanks.

Yes you are right.

I think the proper entries will be:-

TDS Receivable A/c to be debited (with full amount paid). On calculation of Income Tax liability, TDS receivable account will be credited and IT Provision account will be debited, which will adjust the IT Provision account and TDS receivable account will have balance amount of tax excess paid over the IT liability.

On receipt of refund, credit TDS receivable account and debit the bank account; it will adjust the TDS receivable account.