Tds

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CA Deven (Querist)

13 January 2014 Can any 1 Explain me the concept of threshold limit of TDS. for eg. the TDS on commission is required to be deducted if payment exceeds Rs 5000 p.a that means no TDS is required to be deducted till the first payment of Rs. 5000/- and than we need start deduct the same.

Please please explain the above ..to remove my doubt

Rohit Agarwal

Rohit Agarwal (Expert)

13 January 2014 Yes deven it is correct.

The TDS shall not be deducted unless there is a probability that the amount paid / to be paid is likley to exceeed threshold limit.

CA Deven

CA Deven (Querist)

13 January 2014 Rohit 1 more doubt..if the 1st payment is of Rs. 10000/- than TDS is required to be deducted on full value of 10,000/- or only the bal. i.e 5000/- (10000-5000).

Rohit Agarwal

Rohit Agarwal (Expert)

13 January 2014 The TDs is required to be deducted on the amount paid or credited

swasti

swasti (Expert)

13 January 2014 On full amount of Rs 10000/-

CA Deven

CA Deven (Querist)

13 January 2014 Okay that means 5000 is not like our Basic exemption limit of Income Tax.

Thanks Swasti & Rohit

CA Deven

CA Deven (Querist)

13 January 2014 can any 1 guied me regarding the accounting treatment of Works contract.

Actually the thing is we have done the interior work in our office of Rs. 7,00,000/- in last month where should i debit this exp. in my books of accounts.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

27 July 2025 Alright, let me break down the **TDS threshold limit concept** for you clearly, and then I'll touch upon the **accounting treatment for works contract** query you asked:

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### TDS Threshold Limit — How it works

* The threshold limit is the **minimum amount of payment** in a financial year above which TDS deduction becomes mandatory.
* If your payment to a deductee **does not exceed the threshold limit during the year**, you **do NOT deduct TDS**.
* But **if a single payment itself exceeds the threshold limit**, then TDS must be deducted on the **entire payment amount**, not just the amount exceeding the threshold.

**Example:**

* Threshold limit for commission under Section 194H is Rs. 5,000 per year.
* If the first payment is Rs. 4,000, no TDS is deducted as it’s below threshold.
* If the first payment is Rs. 10,000, TDS must be deducted on **full Rs. 10,000**, not just Rs. 5,000.
* This is unlike income tax slab exemptions — threshold limits for TDS are just the minimum trigger for deduction.

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### To summarize:

| Payment Amount | TDS Deduction Required? | On How Much Amount? |
| ---------------------------------------------- | ----------------------- | ---------------------------------------------------------------- |
| Rs. 4,000 | No | Nil |
| Rs. 5,000 | No | Nil |
| Rs. 10,000 | Yes | On full Rs. 10,000 |
| Multiple payments totaling > Rs. 5,000 in year | Yes | From the payment which crosses the limit, on full payment amount |

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### Accounting treatment for works contract — your Rs. 7,00,000 interior work

* **If it is a capital work (improving the office), debit it to a fixed asset or capital work-in-progress (CWIP) account**, because it adds value to your office property.

Entry example:

```
Office Building / Interior Work (Capital Asset) A/c Dr. 7,00,000
To Contractor / Supplier A/c 7,00,000
```

* **If the work is a routine repair or maintenance expense**, debit it to the **Repairs and Maintenance Expense** account.

* Usually, interior works that improve the asset or extend its life are capitalized.

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If you want, I can also guide you on TDS applicability on works contract payments or more detailed accounting entries. Just ask!

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