TDS on expenses provided during the year

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ABC Company prepares Profit & Loss statement every month by 15th of next month. For this purpose, it books various expenditure during the month for which P&L statement is to be prepared, on estimated basis because by that time, many service vendors do not provide actual bills. 

Expenditure booked on estimated basis are then reversed in next month and actual expenditure is booked against it in that month (i.e. next month). For example, if contractor has done a job during the month of April, 2011, it books expenditure of 100 (on estimated basis) in April 2011. Then reverses this expenditure in may 2011 and books actual expenditure (say 110) in May 2011.

The expenditure is therefore booked in a month and then immediately reversed in the next month in ERP system.

I would like to know if ABC Co.is required to deduct TDS on such "DURING THE YEAR ENTRIES" also?

It is,however, deducting in the next month when actual bill of vendor is processed. Further, it is also ensuring deduction of TDS when such expenditure is provided for at the year end.

It's just for the provisal entries made on monthly basis during the year, TDS is deducted only when actual bill is processed.

Please advise.

Praveen

 

 

 

Replies (3)

One view can be like as the rule says to deduct tds as soon as exps is booked or Party a/c credited so as per that co. can deduct tds on exps booked irrespctve of reversal in next month.....& short or excess tDS deduction also can be accordingly adjusted during the period.

 

Let me Know review abt my viewpoint.

In case of fixed amounts of expense such as Rent, Internal Audit Fees etc.  we know the amount hence the expenditure is incurred say at the end of every month & we make TDS when the expenditure is incurred.

In case of estimation of expenses, I dont think that the co would incur the expense as the same would be incurred when the Invoice is being received by the company.  Becuase as this is an variable expenditure whatever is being booked is getting reversed in teh enxt month.  So no TDS would be applicable when the expense is booked on estimation basis.

This is a good question.

There is a practical difficulty in this problem. I would also be happy to know about any possible answer/ case law to the query.

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