Tds

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petchimuthu (Querist)
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10 June 2012 hi friends its argent pls reply me.
in our client company the following query asked for the accounting treatment.
service invoice received from NRI for $12500 on 01.06.2012. its attract TDS at the rate of 10% under section 195.amount paid on 07.06.2012 by US dollar.currency rate on 01/06/2012 Rs.56.208 per dollar,on 07/06/2012 Rs.55.131 per dollar .
My Query is
1.how much amount are to be deducted for TDS?
2.what entry to be passed for entire transaction including profit/loss of foreign fluctuation?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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11 June 2012 TDS amount is $ 1250. Since TDS is required to be deducted at the time of credit or payment, whichever is earlier, TDS shall be converted into Rupees using the exchange rate as on 1.6.2012.

The difference arising due to change in exchange rate is foreign exchange loss/gain and will not affect the amount of TDS.

Entries will be as under:

1.6.2012
Expense A/c Dr 7,02,600
To Creditor 6,32,340
To TDS Payable 70,260

TDS Payable A/c Dr
To Bank A/c

Now you have to pay $ 11,250 to the creditor which you will pay as per the exchange rate prevailing on the date of payment.

Creditor A/c Dr 6,32,340
To Bank A/c 6,20,224
To Foreign Exchange Fluctuation 12,116

The change in exchange rate DOES NOT affect the TDS amount.

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