TDS on provision of audit fees

The Tax is to be deducted at the time of provision as "

"Explanation lays down that even when an income is credited to any account inthe books of account of the person liable to pay income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of tax deduction shall apply accordingly, but the fact that the credit to any account is deemed to be credit to the payee's account also presupposes that identity of the payee can be ascertained. Therfore, this deeming fiction can only be activated when the identity of the payee can be ascertained.. Therefore, the Explanationcannot be invoked in a case where the person cannot be identified a tthe stage at which the provision is to be made."

Now in your case, the person is clearly ascertainable, so the TDS is to be deducted, provided that the amount exceeds the threshold limit, i.e Rs.20000/- (Rs.30000/- w.e.f 01st July 10)

So if the amount of audit fees does not exceed Rs. 20,000 (Rs. 30,000/- w. e. f. 01.07.2010) at the time of provision of fees then do not deduct TDS.

However at the time of provision on 31.03.2010 the threshold limit is still Rs. 20,000/- irrespective of whether the audit is going to get completed before the month of July or not.

Need a small clarification regarding Provision for Audit Fee.

What will be the treatment for Service Tax leviable on audit fee, whether it can be booked for cenvat Credit even if it is a provision entry.

Service tax input can be taken only on payment basis and not on provisions for audit fees

and what about TDS,. DO we need to deduct TDS on service  tax portion while making provision for Audit Fees.

@ indrajeet:

as per CBDT circular : TDS is to be deducted on amount of bill as reduced by amount of taxes.

i.e. it is to be dudected on net amount of fees charged & no TDS to be deducted on portion of service tax.

can anyone pl provide the clarification or case law where it has been clarified whether tds is to be deducted from provision made for audit fee.

It is being interprited and followed in both ways in absense of a clear rule from the dept.

Thanks

madhab

Section 194J specifies that Tax shall be deducted at the time of credit or payment whichever is earlier. We make provision for audit fees on 31st March. The question arises that we dont credit the account of audior on that date. So whether Tax should be deducted or not. But the section further provides that tax should be deducted even if it is credited to any account even it may be a suspense account or a provision account.

So the conclusion is that Tax should be deducted on provision of audit fees.

Section 194J specifies that Tax shall be deducted at the time of credit or payment whichever is earlier. We make provision for audit fees on 31st March. The question arises that we dont credit the account of audior on that date. So whether Tax should be deducted or not. But the section further provides that tax should be deducted even if it is credited to any account even it may be a suspense account or a provision account.

So the conclusion is that Tax should be deducted on provision of audit fees.

Dear amol ji

Can you pls explain about Service Tax portion?  

TDS is to be deducted on provision of audit fees!! But if there is a provision for lawyer fees who is defending company's case in court!! And we made provision for his fees Rs 100000/- payable to him only if company wins the case!! What should be done in such cases

Dear sir,

Agree with your reply that statutory auditor is appointed before the end of financial year and it's remuneration is also fixed but how to deduct tds in case tax auditor is not appointed till the end of the financial year.