Tds

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surender sah (Querist)
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17 March 2014 Assesse (company) hires a cab for an year and makes payment monthly on actual usage of cab (km run basis). Assesse provide as an when advances during the month and also provides diesel to cab operator (which is adjustable with final payment). Now issue relates to the TDS on which amount and how to deal with book entry of diesel etc. Lets take an example:
As on 5th Feb, 2014 advance made: 10000
As on 7th Feb, 2014 diesel provided: 5000 (through credit card or other arrangement with Petrol Pump) further it is adjustable with the final payment of the month. It is also chargeable with 4%.

Now as on 28 th Feb, 2014 final payment is calculated as per actual km run is 47500/-
Calculation is as below:
Final payable: 47500
Adv(as above) : (10000)
Diesel (as above): (5000 )
4% charge for financial support (600) (4% of (10000+5000)
31900 (to be paid in cash/bank)

Now the issue is how to deduct TDS. I am sure that TDS to be deducted on total expenses which is 47500 but how to deal with different transaction during the month. Please suggest. Thanks!

Ravindra Srinivasa

Ravindra Srinivasa (Expert)
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19 March 2014 what is the status of the assessee ?

surender sah

surender sah (Querist)
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19 March 2014 STATUS OF ASSESSEE IS COMPANY.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Thanks for sharing the details! Here’s how you should handle **TDS deduction and accounting** for the cab hiring scenario:

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### 1. **On which amount should TDS be deducted?**

* The total **gross payment for the cab service** is **Rs. 47,500** for February (including advance, diesel cost, and financial charges).
* **TDS should be deducted on the gross amount payable**, i.e., **Rs. 47,500**, because all these amounts are part of the consideration paid for the cab hiring service.
* The **TDS deduction rate** will depend on the nature of payment (likely under **Section 194C** for contract services or 194J if classified as professional fees; but usually cab hiring is 194C).

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### 2. **How to deal with the different transactions during the month?**

* **Advance payment (Rs. 10,000 on 5th Feb):**
When advance is paid, no TDS is deducted at that time (unless advance payment is treated as payment on account). Generally, TDS is deducted on final payment.

* **Diesel provided (Rs. 5,000 on 7th Feb):**
Diesel cost provided to operator is part of the service cost and will be adjusted in final payment.

* **4% financial support charge (Rs. 600):**
This is also part of the cost for the service and included in the final payment.

* **Final payment on 28th Feb (Rs. 31,900):**
This is net payable after adjusting advance and diesel.

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### 3. **Suggested approach for TDS deduction:**

* Deduct TDS **only once on the final total gross amount (Rs. 47,500)** when the final payment is made.
* This avoids confusion and ensures full TDS is deducted correctly.
* You can mention the advance and diesel as adjustments in your internal books, but for TDS purposes, treat the entire Rs. 47,500 as the payment on which TDS is deducted.

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### 4. **Accounting entries for the month:**

| Date | Particulars | Debit (Dr) | Credit (Cr) |
| ------------------------------ | --------------------------------------- | ----------------------------- | ---------------------------- |
| 5th Feb | Advance to Cab Operator (Asset) | 10,000 | Bank/Cash |
| 7th Feb | Diesel Expense (or Advance to Operator) | 5,000 | Credit Card/Bank |
| 28th Feb (on final settlement) | Cab Hiring Expense | 47,500 | Advance to Operator (10,000) |
| | | | Diesel Expense (5,000) |
| | | | Financial Charges (600) |
| | | | Bank/Cash (31,900) |
| 28th Feb (TDS Deduction) | TDS Receivable (Asset) | TDS amount (e.g., 1,425 @ 3%) | Payable to Govt |

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### 5. **Summary:**

| Step | Treatment |
| ------------------------------------ | --------------------------------------------------------- |
| Deduct TDS on gross payment | Rs. 47,500 (total) |
| Deduct TDS at time of final payment | TDS deducted and deposited |
| Adjust advance and diesel internally | Treated as asset or expense and adjusted in final payment |
| Financial charges included in total | Included in gross payment for TDS |

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If you want, I can help you draft the exact journal entries or a TDS calculation sheet for this case. Would you like that?

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