Tds

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Krushit Shah (Querist)
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09 June 2012 If there is concept of grossing up then TDS deducted by a person who receives services and also TDS deposited by same person and not by service provider.

My question is if I am service receiver then i take credit of TDS which is paid by me on behalf of service provider. Because sevice provider recieving full amount of his service and though he take credit of TDS which is not paid or deposited by him to the department.

For Ex. If 'A' provides service to 'B' and raised invoice of Rs. 40,000. Now as per agreement 'B' has to make full payment of Rs. 40,000 to 'A' without deducting TDS. So 'B' deduct TDS after doing reverse calculation on Rs. 40,000 and also deposit it in TDS Department. Now whether 'B' can take credit of that TDS which is paid by him?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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11 June 2012 The amount will be grossed up and the grossed up amount shall be claimed as an expense.

Let us suppose that in the above example TDS is 10%.

Gross amount will be Rs. 44,444. You will be allowed a deduction of Rs. 44,444.

Further, Rs. 44,444 shall be the total income of the service provider. The services provider is eligible to claim credit of TDS and not the service recipient.

The service recipient has borne the TDS amount for which he will be allowed a deduction.

CA Rajendra Purohit

CA Rajendra Purohit (Expert)
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11 June 2012 You cannot make an agreement which is against the law. Secondly, in case you make such arrangements the TDS is to be borne by you and the credit of the same will be taken by the service provider and in no case you can take the credit. And in case you failed to deduct TDS then the expenditure will not be allowed under Income Tax.

If you go by the above example given by the expert you will be at loss, the reason is you can take benefit of 30% if you are in that bracket on 4444 but you need to deposit Rs. 4444 so you will be at loss for Rs.(4444-4444*30%).

The better option is to deduct 4000 from 40000 and deposit it to the government. He will take the credit on his tax payments.

Krushit Shah

Krushit Shah (Querist)
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16 June 2012 In your example Mr. Siddhartha, what will be the gross amount of invoice?? I mean invoice value should be Rs. 40,000 or Rs. 44,444???

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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17 June 2012 Although the invoice will be for Rs. 40,000, the expense will be booked for Rs. 44,444.

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