Dear Vipin sir,

I agree with you related to service tax but incase of TDS you have to gross up the amount of fees like Amir sir have done earlier.

Following entry will be passed out in books

If TDS rate is 20%

Fees A/c                     Dr. 2.5

   To TDS payable                      0.5

   To NR a/c                                 2.0

NO other option incase of TDS is available.

mr vipin gupta and all my friends i thnk for eg

basic amount=  1000

service tax=          103

total       =             1103

but  tds should be deducted on 1000 rs not on including service tax the logic behind this we cant deduct tax on other tax means service tax...

pls correct me if i am wrong

basic amo

Dear Kundan,

TDS is to be deducted on the gross amount paid(inclusive of all kind of taxes)..

TDS is NOT Tax on Tax because it in NOT A TAX initself, TDS is just a manner of deposit/payment of Income Tax to Govt.

I hope this clarifies U...

Dear Amir you are right that TDS is to be deducted on the gross amount paid (but to whom ?)

in this case we are paying Rs. 2 Crore to consultant and paying .2 core to service tax department.

Now tell TDS should be deducted on gross amount paid to Service tax department ??????????????

Yes Mr. Shailender you are right .

TDS should be grossed up hence calculation will be as follows

bill : 2 Crores

Service Tax @ 10% : .2 Crore

TDs @ 10% .22 Crore

Total Obligation : 2.42 Crore

Dear Vipin,

Sec 196 makes it amply clear that TDS IS NOT TO BE DEDUCTED ON ANY PAYMENT MADE TO GOVERNMENT..

Now in case of Resident's we deduct TDS on the amount inclusive of Service Tax because PAYER is not directly depositing that tax to the Government..

Unlike above the situation in case of NRI's is different it is the PAYER who has to deposit the service tax directly to Govt. Hence PAYER CANNOT MAKE ANY DEDUCTION FROM THAT..

Further Sec 195 reads as follows:-

195. ²¹[(1) ²²Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest ²³[***] or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salariesâ€Â ²⁴[***]) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force

I THINK IT IS AMPLY CLEAR THAT TDS IS TO BE DEDUCTED ONLY ON THE AMOUNT PAYABLE TO NON RESIDEN'S..

If u still have any kind of doubt plz let me know I will make my best effort to resolve it..

Yes Amir this time you are right. I am also agree with you

lot of thanks for the same

Now give some more light on Service tax on TDS amount.

Originally posted by : Amir
	Dear Vipin , Lets Assume that TDS rate is 20% and Service tax rate is 10% (FOR SIMPLICITY I M IGNORING EDUCATION CESS, ETC) Now First we have to Gross it up by applying TDS Rate since TDS is to be borne by Indian Co., i:e 2 crores / 80*100 = 2.50 crores  So, Indian Co has to deposit 0.50 crores as TDS Further Indian Co. Has to Deposit Service Tax as well @ 10% Therefore, 10% on 2.50 Crores = 0.25 Crores will be deposited as Service Tax

Dear Vipin,

As far as amount of Service & TDS is concerned my reply has not changed..