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TDS on Barter Deal

Rahul Varma (Asst. Manager-FInance ) (61 Points)

12 March 2009

Hi!Everyone

I want to know that we deal with the another party against Barter Deal of Advertisement. When We / they will raise the Barter invoice in amount to us/them, we shall deduct the TDS on that invoice or not.

Pls give me reply

thanx

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6 Replies

CA Nilesh Sodhani (CA) (411 Points)
Replied 12 March 2009

Originally posted by :Rahul Varma
"	Don't know the answer exactly. but from my point of view Barter is a system of Payment only. And as per Income Tax Act, TDS is to be deducted on accrual or payments which ever is earlier. And as such TDS is to be deducted from the amount which is contracted for.	"

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CA Nilesh Sodhani (CA) (411 Points)
Replied 12 March 2009

Originally posted by :Rahul Varma

That was all my understanding...

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 15 March 2009

TDS is required to be deducted by the person "responsible for payment". In barter deals you are not responsible for payment, you are noy paying any body- you are merely exvchanging goods. And hence TDS provisions are not applicable.

Sumit Arora (Manager Accounts) (204 Points)
Replied 12 January 2012

Hello Friends

I am still confused whether we have to deduct the tds or not

if yes , then both parties has to deduct the tds

can u provide me the relevent case law

waiting for your replies friends

Sumit Arora (Manager Accounts) (204 Points)
Replied 12 January 2012

i.e. we have to book income & expense in the same entry

party is not credited so no tds liability

or i have to pass 3 entries

1 for booking income & 2nd for booking expense & 3rd for netting of the account

friends i am confused

please clarify

waiting for your reply

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CA Neil Ganatra (Partner - Gautam Joshi & Co.) (871 Points)
Replied 12 January 2012

You will have to book income, expense. At the time of income booking party's A/c will be debited and same should be credited at the time of booking of expense so 3rd entry will not be required. You have to deduct tax at source even if you pass only one entry to book income and expense and do not credit party's A/c.

Kindly see the highlighted part of the Act:

Payments to contractors.

¹⁵194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor¹⁶) for carrying out any work¹⁶ (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier

So, even if actual payment is not made, your case will be covered under payment by 'any other mode' as mentioned in the Act itself.

I hope now it's clear to you.