Accounting treatment of tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 September 2011 sir plz guide me regarding the accounting treatment of the following situation in case of a private Ltd company :

Tax payable = Rs.5,00,000

TDS deducted = Rs.2,00,000(standing in the books)

i want to know how much provision for tax should be made in the books of account.

sir the client has done the following treatment:

Profit and Loss Account

Profit before tax 8,00,000.00

provision for tax 3,00.000.00

tds deducted 2,00,000.00

net profit 3,00,000.00

Sir is it right presentation to take
tds deducted to profit and loss account instead of adjusting it with provision for tax.In my opinion he should make tax provision for Rs 5,00,000 and adjust the tds with tax provision. sir plz reply soon.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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01 September 2011 your treatment in not correct, Tax provision need to be provided full with out adjusting the TDS, TDS need to adjust only the actual payment of tax after finalisation of your income tax payable

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
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05 October 2011 I agrees with Ramesh sirs reply. Tax provision is reqd to be provided for full

also the TDS should be shown as Current Assets rather than deduction from the profits