Income tax entry

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2012 Dear Experts,

I have paid advance tax and TDS deducted by client as follows
Advance Tax Paid A.Y.2012-13 --- 20000
TDS A.Y. 2012-13 --- 9000

Now when I am filing returns, the actual tax will be around 15000... So what are the entries that I need to pass.. ANd also the tax will be show as expense in profit and loss?

Mohit Naithani

Mohit Naithani (Expert)
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25 July 2012 1.
Profit & Loss A/c (Dr) 15000
Income Tax liability (Cr) 15000

2.
Income Tax Liability (Dr) 15000
TDS Receivable(Current Asset(12-13)(Cr) 9000
Advance Tax (Current Asset)-12-13(Cr) 20000
Income Tax Refundable (12-13)(Dr)14000

Note: Income Tax is not an expense and not allow to deduct for P&L a/c. it should be shown in liability and adjust from there....

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2012 Just Read an article that Income tax paid should be considered as drawing for sole proprietor and partnership and only for companies it is allowed as expense. Is this right?

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2012 Hi Mohit, so if income tax is not allowed in P&L account, then the entry no. 1 will be

1. capital A/C (DR.) 15000
Income Tax Liability (Cr) 15000

Right?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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25 July 2012 yes. for Proprietor concern Income tax is drawing only. you entry is correct

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