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Tds deduction on advance payment

Abhishek (Student Final) (292 Points)

06 March 2013

Our Company paid an advance to another company Rs. 2,00,000/- after deducting TDS Rs. 4000/- Net Rs. 1,96,000/- for jobwork in 1st Quarter. Now in 4th Quarter We received a bill of Rs. 10,000/- and deductee company is unable to complete jobwork and ready to refund Net amount of Rs. 1,90,000/- (Rs. 2,00,000 - Rs. 10,000). TDS deductible on Rs. 10,000/- is Rs. 200/- but we have deducted Rs. 4000/-, deductee company will claim Rs. 4,000/- in their Income Tax Return, whether this procedure is Right or Wrong? If this procedure is wrong then what will be right procedure. Please describe in detail.

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7 Replies

praveen (Chartered Accountant) (6971 Points)
Replied 06 March 2013

I think there is nothing wrong in the method you have advocated.

Hardeep (Auditor/Accountant) (49 Points)
Replied 06 March 2013

I think the person making refund should not deduct any amount.as the amount paid was for execution of contract.under which section will he be making payment? is interesting question.

CMA RAVI (ASSISTANT MANGER - FINANCE) (478 Points)
Replied 06 March 2013

For claiming the refund the deductor should FURNISH FORM NO. 16A to deductee, wherein the deductee will provide refund. This is however applicable where Payment was done In full without deduction of Tds.

Ashfaq Basha (Manager-Finance & Taxation) (61 Points)
Replied 07 March 2013

No. Deductee can't claim Rs. 4,000 TDS credit. Because AO will demand without admitting income of Rs. 2,00,000 how the credit claimed??. It is better to reverse the entry that u have made in TDS return rather than letting the assesse to calim the entire Rs. 4,000.

Check with the provisions to avoid hardship.

CA Prashant Gupta (DGM (F & A)) (14068 Points)
Replied 08 March 2013

they can claim refund. There is no problem

you can't return TDS to them because it is deposited in Govt account

now give them Form 16A.

SAHIL JAIN (CA FINAL) (23 Points)
Replied 10 March 2013

@ Abhishek..
this is wht ur company can do....instead of gng for refund process....u can issue thm a tds certificate of complete amt...in ur case rs. 4000 and take a cheque of rs 3800 from thm (balance amount of tds for services not rendered)....this way u wud be able to square up their account in ur books.....

CA.D.RAGAVAN (CHARTERED ACCOUNTANTS) (219 Points)
Replied 10 March 2013

Now at the End Process Rs.4000 Deducted for Rs.10000/- Work @ the rate of 40%. The Deductor has to File a correction Statement of the Original Deduction on Rs.200000/- Correcting the Amount Paid as Rs.10000/-. Then the Deductee will get a TDS Certificate for Rs.4000/- and Amount Paid as Rs.10000/-. During Assessment there will not be any mismatch and the Deductee Company will get full credit of Rs.4000/-