TDS on Audit Fee for FY 2025-26: Provisions at Year-End

Overview

Many companies at the end of financial year record an expense entry for audit fees even if the CA has not yet submitted the bill. This is done because the audit work relates to that financial year, so the expense should also be shown in the same year.

Is TDS applicable even if the CA has not raised the invoice yet?

Yes, TDS u/s 194J must be deducted even if the CA has not raised the invoice.

Reason

When a company records audit fees as an expense in the books at the end of the financial year, it is treated as a credit entry and TDS must be deducted immediately.

Key rule

TDS must be deducted at the time of crediting the auditor's account or making actual payment, whichever happens first. A provision entry counts as 'credit'.

Section 194J TDS Rules You Must Know

Consequences of Not Deducting or Depositing TDS 

Two major problems can arise, if TDS is not deducted or deposited late:

Expense disallowed 

30% of audit fees may not be allowed as business expense u/s 40(a)(ia).

Interest on late payment

• 1% per month if TDS was not deducted on time
• 1.5% per month if TDS was deducted but paid late to the government

FAQs

Can TDS on March audit provision be deposited in April?

Yes. For TDS deducted in March, the government allows an extended deposit deadline of April 30 (instead of the usual 7th of the following month).

Do we need to deduct TDS on provision for audit fees?

Yes, TDS is applicable on provisions for audit fees if the auditor is identifiable and the amount is known at year-end, TDS must be deducted under Section 194J of the Income Tax Act at 10% when crediting the provision to the auditor's account, even if payment is made later.

What if audit fees is below ₹50,000 for FY 2025-26?

If audit fees paid or credited to a CA  during the financial year is less than ₹50,000, then no TDS is required.