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Tds related query

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)

18 June 2016

Dear Friends,

If Outstanding Expenses Credited and Labour A/c debited with Rs. 5,00,000/- on 31.3.16 whether it is liable to TDS in the year of entry made or next year when outstanding expenses going to reverse to party account ?

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11 Replies

Deepak Tapse (Accounts Manager - Taxation) (1771 Points)
Replied 18 June 2016

I thnk liability of TDS will arise in year which you have booked expenses. Lets see other view also.

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 18 June 2016

Tds will be done at the time of credit in the books or at the time of making payment whichever is earlier.

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 18 June 2016

"Credit in the books" does it credited to party account ? If yes then TDS will not be applicable bcs it is credited to Outstanding Expense A/c in the year 2015-16

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 18 June 2016

Section 194C clearly used the words "at the time of credit of such sum to the account of the contractor". Credit to a suspense account or any other account by whatever name called will also be treated as credited to party's account.
I hope your query is resolved.

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 18 June 2016

It means TDS is not applicable in the year in which provision is made but applicable in the year in which provision is subsequently reversed to party account. Right ?

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 18 June 2016

On combined reading of section 194C and the Provision of section 40(a)(ia) -Tax has to be deducted at source when amount is paid or credited to the account of the Payee whichever is earlier. When the amount is credited to suspense account or any account by whatever name it is called, then it is treated as amount is credited to the account of the payee and tax has to be deducted at source. Hence Tax has to be deducted at source even on provisions made in the books of accounts to which TDS provisions are applicable.

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C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 18 June 2016

Thank you Harshal

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 18 June 2016

My another query is if rent payable Rs. 1,80,000/- then TDS applicable or not ? My opinion is TDS is not applicable bcz threshold limit is Rs. 1,80,000/- Pls reply.