Tds

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Himanshu (Querist)
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15 May 2017 If A party has contract with B party....And A party pay an amount on instruction of B to workers of B let's 50 employee of B (net of all deduction if paid by b to their worker)....And same is recoverable from next invoice of B
1 whether A is liable to deduct TDS.if yes the
2 tds would be deducted and certificate will issue to worker or B

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
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16 May 2017 pls clarify the nature of contract between A & B
and suppose if B is contractor and on instruction of B if A pays amount to worker then Tds is required on the invoice amount of B with pro-rata basis on the amount paid to workers

Himanshu

Himanshu (Querist)
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16 May 2017 It is civil construction contract..
B instruct A to pay their worker xyz so and so amount ..What is the accounting entry. And tds treatment..
We have pay RS 10 to xyz without any invoice and only on instruction of B, by debiting b account without deducting tds...And this 10 rs will recover invoice of B of 100 RS on which we will deduct tds on full 100 rs

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 In your case, where **A is making a payment directly to the workers of B** (on B's instructions) and adjusting it against the **invoice raised by B**, the **TDS implications** must be carefully evaluated to remain compliant.

Here’s a clear answer based on your fact pattern:

---

### 🔹 Situation Summary:

* A has a **civil construction contract** with B (i.e., B is the contractor).
* B instructs A to pay **Rs. 10 directly to its workers**, without an invoice from the workers.
* Later, B raises an invoice for **Rs. 100**, and A adjusts Rs. 10 already paid, and pays Rs. 90.
* A deducts TDS on full Rs. 100 at that stage.

---

### ✅ TDS Treatment:

1. **Yes, TDS is applicable.**

* Since B is the **contractor**, the obligation to deduct TDS arises under **Section 194C**.
* Even if the payment to workers is made directly by A, it is **on behalf of B**, and forms **part of the consideration** under the contract.

2. **TDS should be deducted only on B’s invoice** (i.e., Rs. 100), **not separately for the Rs. 10 paid to workers**.

3. **TDS Certificate (Form 16A)** will be issued to **B**, not to the workers.

* The payment is made under a contract with B.
* The workers are not parties to the contract, and A has no legal relationship with them.

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### ✅ Accounting Entry in Books of A:

#### When Rs. 10 is paid to B’s worker:

```
B’s A/c Dr. 10
To Bank A/c 10
(Being amount paid to B's worker on B's instruction)
```

#### When invoice of Rs. 100 is received from B:

```
Construction Expense A/c Dr. 100
To B’s A/c 100
(Being bill received for civil works)
```

#### When Rs. 90 is paid to B and TDS deducted:

```
B’s A/c Dr. 90
TDS Payable A/c Dr. 10
To Bank A/c 90
To TDS Payable A/c 10
(Being payment to B after adjusting advance and deducting TDS)
```

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### 🟡 Key Points:

* Even if payment is made to B’s workers, **A is not liable to deduct TDS separately** from that payment.
* The **TDS on total invoice** from B (Rs. 100) suffices, since the Rs. 10 is part of B's bill.
* This approach is compliant and avoids double deduction or incorrect TDS credit.

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Let me know if you need a **note or certificate template** explaining this treatment to auditors or B.

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