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TDS : Date of Deduction

Amir (Learner) (4016 Points)

22 February 2010

Hi Friends,

Plz spare some time to give ur invaluable opinion on this -

One of d requirement is TDS u/s 194 C is to be deducted incase aggregate of paymnts under different contracts exceeds Rs. 50,000 in a year....

Eg - There are 3 contracts from same contractor -

Contact A = Rs 15,000, Date of credit 01.10.2009

Contact B = Rs 19,0000, Date of credit 01.11.2009

Contract C = Rs.19,000, Date of credit 01.12.2009

Now TDS is to be deducted on ALL contracts - Agreed, No dispute on this......

Bigger Question is what is the due date of deduction/payment of TDS in case of Contract A & B??

I m sure u will appreciate that intention to post this question is to know legal side & not the practical one........

Thanks in Advance......

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17 Replies

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 22 February 2010

Dear Amir,

as per my opinion tds shud be deposited on 7th of the nov & dec 09.

regards,

ratan

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Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 22 February 2010

In my opinion, if these contracts were entered on need to need basis, that means that there was no intention to enter into these contracts untill the need arises, then whole of the tax shall be deducted on the last amount of 19000 on 1.12.2009 and shall be deposited on or before 7th January, 2010. However, if it was expected that there shall be 3 contracts or it was decided in advance to have such contracts whose aggregate value shall exceed Rs. 50,000, then tax shall be deducted on each transaction.

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CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 22 February 2010

Date of deduction of TDS should be 01-12-2009 and due date for payment of TDS should be 07-01-2010 for all the three contracts.

1 Like

Amir (Learner) (4016 Points)
Replied 22 February 2010

Dear Friends,

Let me share my understanding -

1) There is only one date prescribed by the law for the purpose of deduction & that is the date of payment/credit whichever is earlier, No specific relaxation is given in case of Contract A & B.

2) Sec 194(5) & proviso thereto contains words which suggest that one has to estimate about future contracts to determine whether he is liable or not to deduct TDS on a given contract -

Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.

In view of above two reasons I feel tax on Contract A & B has to be deposited by 7 Nov & 7 Dec respectively.........

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 22 February 2010

I understand amir, what is your opinion.. but what if the third contract doesnot take place or you dont even have any idea that it shall take place.. what shall you do in such case? shall you deduct tax on both the payments.?

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C.Balaji (Learner) (1867 Points)
Replied 22 February 2010

Dear Mr.Amir brother....

According to me....

If you expect the Amount to exceed Rs.50000/- i think you should deduct tax and deposit before 7th of next month....

If you don't anticipate other contracts....i think the tax will be deducted only when it exceeds Rs.50000 i.e. contract C....

2 Like

Amir (Learner) (4016 Points)
Replied 22 February 2010

Dear Amol Sir,

I agree with u that how would one anticipate & what one would have done had there been no Contract C...

My views to that -

This is the practical difficulty but then that doesn't mean that we can interpret it in a way that's suits us....further it's not the only place where it has happend the entire advance tax provisions based on estimation.....

Now, had there been no contract C - Sir ji then it would be different story altogether if u change d facts of d case.............. anyways taking further what u have mentioned - Suppose contract C was not there then payer had either deducted tax or had not deducted tax...In either of the situation - What's d issue there is no non compliance since the deduction was not required & overcompliance cannot be said as non compliance.

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OM PRAKASH (Student) (41 Points)
Replied 22 February 2010

Dear Amir

As per my opinion TDS on contract A should be deducted on 01/10/2009 and it should be deposited on or before07/11/2009.and for contract B TDS should be deduted on 01/11/2009 and deposited on or before 07/12/2009.

Regards,

Om Prakash

1 Like

pankaj sharma (CA ) (324 Points)
Replied 22 February 2010

agree to sir amol gopal kabra

1 Like

Dilip (Working) (408 Points)
Replied 23 February 2010

Dear Amir, Mr. Amol is correct.

U r saying it is an practicality...but u have to consider by this way only...because provisions are saying like that only, if there is single payment then it is Rs. 20000/- and in aggregate if it is Rs. 50000/- or more in a same FY. so until and unless ur bill reach or crosses Rs. 50000/- how u r able to deduct the tax, that why the deductor has given to think and estimate future payments and take the actions accordingly.

So in my opinion, in this case due date is 7th Jan-10 and tds to be on total amt.

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Max Payne (employed) (2574 Points)
Replied 23 February 2010

Dear Amir bro,

Amol Sir is right cos we have to consder practicality as well... We dont know if third contract is going to be there or not....

The TDS has to be deducted when the 3rd credit is given only.....

But the TDS should be for the entire amount, including previous credits.... Deposit of entire TDS should be on 7th january 2010

Pls lemme point out another situation where the words used are "likely to exceed"...

That is in section 194-I.... if we pay rent of 45000 for the month of April and May, we dont deduct TDS if we know that the contract is gonna expire by May and we are gonna move out of the landlord's premises.... WE DONT HAVE TO WORRY IF WE ARE NOT GOING TO ENTER INTO RENT AGREEMENT WITH HIM AGAIN...

It is upto us to anticipate whether it is "likely to exceed" or not.... but that anticipation cant be used against you...

A conservative assessee will deduct TDS on all credits at the time of credit, but its not required... as per the words employed in the section.... Its only proper to have a good communication with vendors regarding the 50000 barrier....

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Max Payne (employed) (2574 Points)
Replied 23 February 2010

Dear Amir bro,

Amol Sir is right cos we have to consder practicality as well... We dont know if third contract is going to be there or not....

The TDS has to be deducted when the 3rd credit is given only.....

But the TDS should be for the entire amount, including previous credits.... Deposit of entire TDS should be on 7th january 2010

Pls lemme point out another situation where the words used are "likely to exceed"...

It is upto us to anticipate whether it is "likely to exceed" or not.... but that anticipation cant be used against you...

Max Payne (employed) (2574 Points)
Replied 23 February 2010

Dear Amir bro,

Amol Sir is right cos we have to consder practicality as well... We dont know if third contract is going to be there or not....

The TDS has to be deducted when the 3rd credit is given only.....

But the TDS should be for the entire amount, including previous credits.... Deposit of entire TDS should be on 7th january 2010

Pls lemme point out another situation where the words used are "likely to exceed"...

It is upto us to anticipate whether it is "likely to exceed" or not.... but that anticipation cant be used against you...

Mayank Shyamsukha (CA FINAL) (119 Points)
Replied 23 February 2010

Hi Amir,

In my opinion, TDS will be attracted when Single Contract exceed Rs. 20000/- And in aggregate Rs. 50,000/-. The said provision become applicable in the month of November because it crossed the limit of Aggregation Rs. 50000/-.

Hence For Contract A and Contract B liable for Tax Deduction at Source in the month of November and required to be deposited within 7th of December. For Contract C, TDS in December and Deposit by 07th of January.

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