Applicability of TDS

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TH (Querist)
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12 March 2009 Dear Sir,

Is a TDS tax payment for the account of a vendor be a benefit to the vendor or would it be simply an advance tax the vendor has to pay? Also, is there any other benefits to the vendor when a TDS tax payment is made for the vendor's account?

Sukanta Mandal

Sukanta Mandal (Querist)
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12 March 2009 Ours is small IT compant which is registered under STPI. We may fear that next year our export revenue will fall below 50% of total revenue. What would be the consequence for this. Secondly what kind of measures we can take like incorporating a separate co or creating another unit to get the STPI benefits even though as a whols co, export falls below 50%.

Regards
Sukanta

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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12 March 2009 TDS - TDS is treated in the same way as advance tax at the computation of final tax liability. It is deducted from the final tax liability and you have to pay balance tax if any or you will get refund if the TDS is higher than the final tax liability.

It is current assets in the hands of vendor/deductee.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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12 March 2009 STPI - I don't understand what do want to ask above.

If the export turnover is going to fall, then why do you need a separate unit. you will get the STPI benefits in the same way whether your turnover increases or decreases.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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25 July 2025 Your question relates to the **applicability and implications of Tax Deducted at Source (TDS)** under Indian tax laws. Here's a clear explanation:

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### 💡 **What is TDS?**

**Tax Deducted at Source (TDS)** is a system under which tax is deducted by the payer (e.g., a company) when making certain payments (e.g., to a vendor), and then deposited with the government on behalf of the payee (the vendor).

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### 📌 **Your Key Questions Answered**

#### 1. **Is a TDS tax payment for the account of a vendor a benefit to the vendor or just an advance tax?**

* **It's not a direct benefit**, but rather:
* It is **considered as advance tax** paid on behalf of the vendor.
* This amount is **credited to the vendor’s PAN account** with the Income Tax Department.
* The vendor can **claim credit for the TDS** amount while filing their income tax return.

#### 2. **Are there any other benefits to the vendor when TDS is deducted?**

* **Indirect benefits** include:

* **Proof of income**: TDS deduction appears in Form 26AS, which helps establish income received during the year.
* **Tax compliance visibility**: Helps with loan applications, government tenders, and financial scrutiny.
* **Reduced year-end tax liability**: Since part of the tax is already paid, it reduces the final payment burden or may result in a refund.

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### 🧾 Example

If a vendor is to receive ₹1,00,000 and the TDS rate is 10%, the payer deducts ₹10,000 and pays ₹90,000 to the vendor.

* ₹10,000 is deposited with the IT department against the vendor’s PAN.
* The vendor can **claim this ₹10,000** when filing their tax return.
* If the vendor's total tax liability is ₹20,000, they only need to pay ₹10,000 more.

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### ✅ Final Summary

* TDS is **not a benefit**, but a **tax paid on behalf of the vendor**, which they can **claim as a credit**.
* It ensures tax collection at the source of income.
* It provides some administrative and financial tracking advantages to the vendor.

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