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TDS on Provisions

Dsr (37 Points)

24 June 2007

Dear All,

whether TDS is required to be deducted on provisions. For example if i am making provision for payment to my consultant (because bill has not received).

Regards

DSR

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12 Replies

Narayanan (Practice) (13 Points)
Replied 24 June 2007

yes..

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Dsr (37 Points)
Replied 24 June 2007

Dear Sir, Thanks for reply. I also think of the same. But could u please give reference from the Income Tax Act or case law. One of my peer is not agreeing with this and i do not have any supporting for this. Please provide some reference. Regards DSR

vikasmurudkar (13 Points)
Replied 25 June 2007

Yes. TDS is reqd. to be deducted on provisions. The relevant sections(such as 194C, 194H, 194I, 194J etc) specifies that the tax is to be deducted at the time of credit of such sem to the account of the payee 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. Further, explanations in these sections specifies that any such sums is credited to any accoutn, whether called "Suspense Account" or by any other name, in the books of account of person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of the relevant section shall apply accordingly (generall explanation 2)

CA Manoj Sahoo (Service-CA) (44 Points)
Replied 25 June 2007

yes, vikas is absolutely right , thanks vikas

Dsr (37 Points)
Replied 25 June 2007

Dear All, Thanks a lot

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bharani (ca) (46 Points)
Replied 25 June 2007

if you are not able to quantify the amount party wise how you will deduct the tds where you cannot quantify for each party wise, it is not possible to deduct and pay the tds please comment on this topic

bharani (ca) (46 Points)
Replied 25 June 2007

when you are not received the bill, how it is possible practicly to deduct on provision amount we make provision of previous month, but it varies/ cancels total bill for the relevant month, how it is possible to deduct tds

Vk Duggal (320 Points)
Replied 25 June 2007

in case of the fixed rate contract, you should be aware of the amount even if bill is not received. normally a circular should be issued to all parties to submit bill at the year end and parties will not keep the billing pending for the two months. even the sales tax return for the year end by that should have been filed. service tax return will also be filed by that time. if these returns are filed, amount will be quantified.

amrit sharma (job) (13 Points)
Replied 28 June 2007

Yes, it is to be deducted on the amount credited to provisions.....

(Guest)

it not possible to deduct tds on provision when you could not able to correctly ascertain the bill amoun, suppose i am closing my accounts exactly on 31st march,2007 when i have not received the bill, but i have to make accruals based on previous months figures/ or someother basis without knowing the exact bill amount even if i deduct the tds, but after later stage, bill amount changes/ or i cancel the bill/ excess/short of the provision made, who how to treat the already deducted tds amount it is very difficult to tds on provisions unless if know the exact bill amount by particular period end

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SHEETAL BAJAJ (SERVICE) (33 Points)
Replied 03 April 2009

it seems everybody is of the opinion that TDS has to be deducted on provisions also. Please any body can tell me the solution to the situation when if after provision for certain amount, the bill amount gets reduced, then how to handle the situation.

shabbir (article clerk) (21 Points)
Replied 28 December 2010

Dear all.

If we have made a Provision of some expenditure,Say Provision for freight and due to the non availability of exact amount we didint make a provision of T.D.S. but we have paid the same T.D.S. on Payment basis and which is also before 31st May, whether this amount will be allowed in the current year or whether it will be disallowed and allowed in the next Ass. Year.