Tds adjust with income

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 September 2012 Sir,
We had made accounted for excess TDS in tally and after receipt of refund, we are lef with Excess TDS balance. We want to book it as our income, Is that possible ?If yes what would be the journal entry fr dt

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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08 September 2012 When You Accounted Excess, Then What Entry U Had Made???

Querist : Anonymous

Querist : Anonymous (Querist)

05 November 2012 It was adjusted with TDS

Bank Dr.
To TDS

But the result was credit balance in TDS Acount. How do I rectify it now ?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 You're dealing with a common accounting issue: **excess TDS balance** in your books (specifically in Tally), and you're wondering whether to book it as **income**, and **how to rectify it** via journal entries.

Let’s walk through this **step-by-step**, both logically and with appropriate journal entries.

---

### 🧾 1. **Understanding the Scenario:**

* You had **excess TDS** recorded in your Tally account.

* Upon **receiving a refund**, you passed:

```
Bank A/c Dr.
To TDS A/c
```

* Now, after the refund, the **TDS account still shows a credit balance**, meaning it was **overstated** earlier.

---

### 🔍 2. **Is it income?**

✅ **Yes, if the excess TDS was wrongly recorded and not recoverable or refundable**, and the **source transaction doesn’t exist or was short-booked**, then you can **write off** the excess as **miscellaneous income** or **prior period income**, depending on the situation.

🚫 **However**, if the excess is due to **incorrect accounting (e.g., duplicated TDS entries)**, the correct action is to **reverse the wrong entry**, not to treat it as income.

---

### 🧮 3. **Rectification Options:**

#### ✅ **Case A: Excess TDS is recoverable (refundable or to be adjusted in future years)**

➡️ Then **do nothing now**. Keep it in "TDS Receivable" or "Advance Tax" under **Assets**.

#### ✅ **Case B: Excess TDS is not recoverable (not matching with Form 26AS or refund already received)**

➡️ Then **write it off** as income.

---

### 📘 4. **Journal Entry (If writing off as income):**

```text
TDS A/c Dr. ₹X
To Miscellaneous Income A/c ₹X
```

> 📌 Alternatively, use **"Prior Period Income A/c"** if it relates to earlier years.

This clears the credit balance in the TDS account.

---

### 🔄 5. **Alternative (If due to accounting error):**

If the TDS balance is due to a wrong or duplicate entry in earlier transactions, you should **reverse that wrong entry**, for example:

```text
Expense A/c Dr.
To TDS A/c ₹X
```

Or adjust the original transaction appropriately in Tally using **journal vouchers** or **debit/credit notes**.

---

### ✅ Final Recommendation:

* **Verify with Form 26AS or AIS** whether the TDS is actually credited to your PAN.
* If it's not recoverable and the refund is settled, it's **safe to write off** the excess as **income** using the journal entry above.
* Keep proper **audit trail** and **notes to accounts** for transparency.

Let me know if you want help passing this in Tally specifically.

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