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Tds On liability for expenses

pragadeeshkanna (searching) (281 Points)

06 May 2010

Frnds,

Is that Tds shud be deducted and paid for the amount for which we create provision at the year end. For eg rent,audit fees etc.

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9 Replies

Amir (Learner) (4016 Points)
Replied 06 May 2010

Dear Pragyadeesh,

TDS is to be deducted at the earlier of payment or credit to the account of payee.

Further read this -

Where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

Conclusion - YES, TDS shall be deducted even on the provisions.

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(Guest)

Tax is to be deducted either

A) at the time of credit of such sum to the account of the payee,(or)

B) at the time of payment thereof in cash or by issue of cheque or by any other mode,

Whichever is earlier.

Regards

K.ilayaraja.

pragadeeshkanna (searching) (281 Points)
Replied 06 May 2010

Thank u frnds. Should the same be deducted and paid or can be deducted now and can be paid when the actual expense is booked?

TRILOCHAN (SENIOR ACCOUNTANT) (698 Points)
Replied 06 May 2010

YA, YOU SHOULD DEDUCT THE TDS for the amount for which we create provision at the year end. For eg rent,audit fees etc.

BECAUSE TDS SHOULD DEDUCT ON THE DATE OF PAYMENT OR CREDIT TO PAYEE , WHICH IS EARLIER

pragadeeshkanna (searching) (281 Points)
Replied 06 May 2010

Frnd wat about the payment?

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vikash rathi (Chartered Accountant) (787 Points)
Replied 06 May 2010

yes tds must be deducted on provisions also..........tds to be deducted on the time of payment or booking of expenses which ever is earlier...........

vikash rathi (Chartered Accountant) (787 Points)
Replied 06 May 2010

to understand the above concept clearly look at this example

audit fees :200000

provision : 31.03.2009

payment date : 1.08.09

tds amount : suppose 20000(10 %)

then in the given case

tds will be deducted on 31 .03 .09 and same will be deposited with in time limit (i.e. last date of return file means 30.09.09 for the 31st march) and at the time of payment to auditor....on 1.08.09 rs 180000 will be paid to auditor

hope u r doubt is clear

Prejith (Pursuing CA) (92 Points)
Replied 07 May 2010

If provision has been created in the month of March, then TDS has to be remitted on or before 7th of the subsequent month.

If payment/ provision has been created on the last day of the closure of books of accounts (end of FY), then TDS shall be remitted within 2months from the closure of books.