Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2013 An assessee being a Pvt Ltd Company has not deducted TDS on Salary for the FY 12-13 Now in Sept 13 the mistake was identified and the created the TDS liability and deducted the TDS on salary for the FY 12-13.They deposited the TDS with an interet of 1% per month (TDS not deducted at all so interest at 1% per month).
My query is that whether the Salary will be disallowed for income tax calculation or will it get deduction because TDS is paid before the due date of filing return. Shoul the TDS {ayable entry passed in the FY 12-13 or FY 13-14.

Ganeshbabu K

Ganeshbabu K (Expert)
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17 September 2013 1)Salary will be allowed as it is paid before filing of return

But
2)in case of late deduction it can be reported under Clause 27(b)

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2013 more clear explanation pls

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Great question! Here’s a detailed explanation for your scenario:

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### Situation:

* Pvt Ltd company **did not deduct TDS on salary** for FY 2012-13.
* Later (in Sept 2013, FY 2013-14), the company realized the mistake, deducted TDS on salary of FY 12-13, and deposited it with interest @1% per month.
* Query: Will the salary expenses be allowed as a deduction in FY 12-13, or disallowed because of late TDS deduction?
* Also, in which FY should the TDS payment entry be recorded?

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### Answer:

1. **Deduction of Salary Expense:**

As per **Section 40(a)(ia)**, if TDS is not deducted or deposited on salary, the salary expense is disallowed in the **previous year** for which salary pertains (i.e., FY 12-13) **unless** the TDS along with interest and penalty is paid **before the due date of filing the income tax return**.

* Since the company deducted and deposited TDS along with interest **before filing the return for FY 12-13**, the salary expense **will be allowed** as deduction for FY 12-13.

2. **Interest on Late Deduction:**

* The interest @1% per month on late deduction of TDS is payable and paid.
* This interest is an allowable expense in FY 2013-14 (year in which interest is paid).

3. **Accounting Treatment:**

* The **salary expense** belongs to FY 12-13.
* The **TDS payable (liability)** should ideally be recorded in FY 12-13 (to match the salary expense).
* The **interest on late TDS** payment is an expense of FY 13-14.
* In practice, since TDS was deducted and paid in FY 13-14, the company can pass an adjusting entry in FY 13-14 to reflect the TDS liability and salary expense adjustment for FY 12-13.

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### Summary:

| Aspect | Treatment |
| ---------------------------- | -------------------------------------------------------------- |
| Salary expense deduction | Allowed for FY 12-13 if TDS paid before ITR filing date |
| TDS payment | Record as liability in FY 12-13 or adjust in FY 13-14 accounts |
| Interest on late TDS payment | Expense in FY 13-14 |

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If you want, I can help draft the journal entries for this or guide you on filing the revised TDS returns for FY 12-13. Would you like that?

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