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Tds on payment

CA.Vivek Chevli (Chartered Accountant) (59 Points)

04 September 2013

Hello Everyone,

My question is "Is required to deduct TDS on Debit amount of TDS in Party's ledger?

As example

We paid a contractor covered u/s 194C XYZ amount Rs.1,00,000. We paid without any deduction.Now at quarter or month end we are deducting amount Rs.2,000 @ 2% from it and debited to his account.

Now total debit increase by Rs.2000 so if calculate after this debit entry total payment increase by Rs.2000.

We have to calculate on total Rs.1,02,000 @ 2 % Rs.2,040 out of which Rs.2,000 is already debited so extra amount Rs.40 we have to pay.

So total TDS amount will be Rs.2040 instead of Rs.2000 on Rs.1,00,000.

Which is correct amount of TDS in above case?

Kindly give reply at earliest ...

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16 Replies

Rajesh Kumar Loya (student) (177 Points)
Replied 04 September 2013

Dear Vivek,

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Rajesh Kumar Loya (student) (177 Points)
Replied 04 September 2013

Dear Vivek,

Hey ignore earlier post. Consider following entries,

As per Rule:

1. Dr: Party A/c

Cr: TDS Payable A/c

2.Dr: TDS Payable A/c

Cr: Cash/Bank A/c

(when TDS paid)

As per your querry,

1. Dr: Expenditure or Party A/c

Cr: TDS Payable A/c

2.Dr: TDS Payable A/c

Cr: Cash/Bank A/c

(when TDS paid)

CA.Vivek Chevli (Chartered Accountant) (59 Points)
Replied 04 September 2013

Dear Rajesh

When I paid that person I have not deducted TDS from A/c.So i have done following Entry in his A/c.

Party A/c. Dr... 2000

To Tds Payable 2000

(TDS on Payment Basis Deducted)

Now total Debit will increase by Rs.2000

S.R.Associates (Tax & Investment Consultants) (115 Points)
Replied 04 September 2013

You have to deduct TDS only on Rs.100000/- not on Rs.102000 cause section says that it is compulsory to deduct TDS on the amount paid or credited.

Ranu Purohit (Job) (55 Points)
Replied 04 September 2013

Dear Vivek ,

you are right with your amount which is deduted earlier.Contractor Amount is Rs. 100000 and TDS will deduct on this amount which is to be 2000/-.So the Entry will pass as follows :

1.Party a/c...... Dr. 100000

TDS a/c.... Dr. 2000

To Bank/Cash a/c 102000

(Being paid to party and tds paid)

So, the amount which is liable to pay to party is chargble to TDS.

i hope it wil work for u to better understand.

Thanks/Regards,

Ranu Purohit

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CA.Vivek Chevli (Chartered Accountant) (59 Points)
Replied 04 September 2013

To.

S.R. Associates.

In TDS Section it is said that amount should be deducted on total Debit and TDS amount is also consider payment itself.

Even after this TDS not to be deducted on Rs.2000.?

Pratik CA Final (Article Assitant) (102 Points)
Replied 04 September 2013

The entry should have been,

Party/Expenditure a/c -dr.

To Tds u/s .....

To Bank/cash

then,

TDS u/s.... -dr.

To bank

(when TDS is being paid)

But in your case, i think you have already made the payment but you need to pass the entry and u can get into settlement with the party .

S.R.Associates (Tax & Investment Consultants) (115 Points)
Replied 04 September 2013

I agree that you have forgot to deduct TDS but still you are debiting the amount to Party a/c means you want to recover it from party.That's why,you have to deduct TDS only on Rs.100000 but if you consider it as your cost and rather than recovering it from party ,You debited to your P&L from Rs.2000 than you will have to deduct TDS on 2000 Rs also.