Tds to be deducted on which amount

Dear Rahul...well generally we deduct TDS at the time of payment or at the time of crediting the account of such person/entity, whichever is EARLIER, so this might create some problem. You should deduct tax and immediately deposit it to department with interest @ 1.5% p.m. (for late deposit of tax) and 1% p.m. (for non deduction of tax) [part of month-even 1 day delay would count to month, so do accordingly]

As regards amount is concerned, i'm a bit confused a little bit what would that be!!

Well here two situations are possible:

1. The Partnership Firm is ready to bear the TDS; the TDS will be deducted on Rs. 10,10,101.
2. The Sole Proprietorship Firm is ready to pay back the TDS amount, in that case TDS will be deducted on Rs. 10,00,000 only.

TDS is deducted either at the time of payment or at the time of credit in the name of the contractor in the books of the account, which ever is earlier.Since, you have not deducted TDS at the time of making advance payment, you have not complied with the TDS provision of the Income Tax Act. Being the contractor is a Sole Propritorship firm, deduct TDS @ 1% on Rs.10 lakhs u/s 194-C & deposit the same immediately. Recover the amount either from the Security deposit of the contractor, if any or from the subsequent bill of the contractor.

Dear Fenil,

If the firm had contract for execution of only one contract and it no longer has any contact with that contractor after making payment. what should the Partnership firm do-

Should it deposit TDS now after deducting since it cannot ask that sole proprietor firm to give back the TDS amount??

U Can pay TDS of 10,000 in Govt A/c

Ask the  Proprietor  for refund (as he will be getting the same as TDS Credit)

Please deduct TDS on Rs.10 Lakhs along with interest pay to the Govt.