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Deduction of TDS

Naina (CA Student) (477 Points)

10 January 2009

I am these days auditing a proprietorship firm's books. Their accountant pass TDS entry in books only when payment is made by them. But I have read that TDS is to be deducted at the time of credit of the party or at the time of payment, whichever is earlier. I asked him that he is doing wrong. But he said that they are doing this only from many years. Now should I tell this to my CA. Why earlier person, who was auditing their books, didn't look at it. Tell me what is the correct procedure. I am producing an eg. what they do:-

They credited Transporter on 20th November and makes payment to them on 10th December. TDS is deducted on 10th Dec. only and cheque for the balance amount is issued to the Transporter. Now they deposit TDS on 6th Jan.

Are they doing wrong? I think they should have deducted TDS on 20th Nov. and deposited that by 7th Dec.

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6 Replies

Nikhil Kumar (CA , Qualified CPA) (910 Points)
Replied 10 January 2009

Yes Naina you are right. This is a common mistake done by most of the firms. They should be advised to correct this and follow the correct procedure.

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Surendra (tax consultancy) (146 Points)
Replied 10 January 2009

Originally posted by :Naina
"	I am these days auditing a proprietorship firm's books. Their accountant pass TDS entry in books only when payment is made by them. But I have read that TDS is to be deducted at the time of credit of the party or at the time of payment, whichever is earlier. I asked him that he is doing wrong. But he said that they are doing this only from many years. Now should I tell this to my CA. Why earlier person, who was auditing their books, didn't look at it. Tell me what is the correct procedure. I am producing an eg. what they do:- They credited Transporter on 20th November and makes payment to them on 10th December. TDS is deducted on 10th Dec. only and cheque for the balance amount is issued to the Transporter. Now they deposit TDS on 6th Jan. Are they doing wrong? I think they should have deducted TDS on 20th Nov. and deposited that by 7th Dec.	"

Surendra (tax consultancy) (146 Points)
Replied 10 January 2009

ya, u are right. tds deducted on the credit or payment whichever made earlier. As u tell ur problem the accountant paid tds on 6th jan whereas he should be paid upto 7th dec. Of course u r right .

Shudhanshu Agrawal (Business) (2570 Points)
Replied 11 January 2009

Leaving the section of TDS on Salary (192A & 192B), in other sections TDS is deducted on payment or credit which ever is earlier under this case....when u will do tax audit then u will disclose the things and even u can ask the firm to correct it and deposite the interest after calculating it

And i think in Audit Report also it should be mentioned if they dont revise it

Do correct me if im wrong

(Guest)

Originally posted by :Shudhanshu
"	Leaving the section of TDS on Salary (192A & 192B), in other sections TDS is deducted on payment or credit which ever is earlier under this case....when u will do tax audit then u will disclose the things and even u can ask the firm to correct it and deposite the interest after calculating it And i think in Audit Report also it should be mentioned if they dont revise it Do correct me if im wrong	"

you are right sudhansu

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Dinesh (Auditor) (66 Points)
Replied 28 February 2009

Yes, the practice of deducting the TDS at the time of payment is wrong, bcoz it results in late depositing of TDS to the government for which we report in our 3CD.

Regarding ur why the earlier auditors have not looked into, is not relevant. Since if u dig up anys work u will find some or the other mistakes.

So its better to go on purifying the books and forget the past. U can tell ur CA of the said mistake.

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