TDS deducted on U/S 194H
This query is : Resolved
14 September 2017
IS THERE ANY GUIDANCE NOTE OR INSTRUCTIONS GIVEN BY ICAI ON ACCOUNTING ... A DISTRIBUTOR IS DEALING IN RECHARGE COUPAN OF A TELECOM COMPANY ..
15 September 2017
plz give me repla
27 July 2025
About **TDS deduction under Section 194H (Commission or Brokerage)** and its accounting treatment, especially for a distributor dealing in telecom recharge coupons:
---
### Key points on TDS u/s 194H:
* **Section 194H** mandates TDS deduction @ 5% on commission or brokerage payments made to residents.
* The payer (telecom company or any other) deducts TDS while paying commission to the distributor.
* The distributor receives commission income net of TDS.
---
### ICAI Guidance / Accounting Treatment:
ICAI does not have a specific separate "guidance note" only for TDS u/s 194H but general principles of accounting and taxation apply, which are:
#### 1. **Recording Commission Income:**
* Record the **gross commission** as income when earned.
* TDS deducted by the principal company is treated as **tax deducted at source (receivable)**, i.e., an asset.
**Entry for commission income and TDS receivable:**
```
Bank / Receivable A/c Dr. (Net amount received)
TDS Receivable A/c Dr. (Amount of TDS deducted)
To Commission Income A/c (Gross commission amount)
```
---
#### 2. **TDS Receivable as Current Asset:**
* TDS deducted is not an expense; it is a tax credit available to the distributor.
* Show TDS receivable under **Current Assets** in the balance sheet until it is claimed/refunded.
---
#### 3. **When Filing Income Tax Return:**
* The distributor can claim the TDS credit against their tax liability or claim refund if excess deducted.
* TDS is not deducted by distributor but by principal company on their behalf.
---
### Example:
Suppose commission is ₹10,000 and TDS @5% deducted ₹500.
**Journal:**
```
Bank A/c Dr. 9,500
TDS Receivable A/c Dr. 500
To Commission Income A/c 10,000
```
---
### Practical Notes for Distributor:
* Maintain TDS certificates (Form 16A) from the principal company.
* Match TDS entries with Form 26AS while filing return.
* If TDS is not reflected, request the principal company to file TDS returns correctly.
---
### Summary:
* ICAI’s accounting standards on revenue recognition and assets apply.
* TDS deducted under 194H is a receivable, not an expense.
* Commission income is recorded gross.
* Proper documentation and TDS certificate collection is important.
---
If you want, I can help draft accounting entries or suggest how to treat these in your books. Would that help?
---
### Key points on TDS u/s 194H:
* **Section 194H** mandates TDS deduction @ 5% on commission or brokerage payments made to residents.
* The payer (telecom company or any other) deducts TDS while paying commission to the distributor.
* The distributor receives commission income net of TDS.
---
### ICAI Guidance / Accounting Treatment:
ICAI does not have a specific separate "guidance note" only for TDS u/s 194H but general principles of accounting and taxation apply, which are:
#### 1. **Recording Commission Income:**
* Record the **gross commission** as income when earned.
* TDS deducted by the principal company is treated as **tax deducted at source (receivable)**, i.e., an asset.
**Entry for commission income and TDS receivable:**
```
Bank / Receivable A/c Dr. (Net amount received)
TDS Receivable A/c Dr. (Amount of TDS deducted)
To Commission Income A/c (Gross commission amount)
```
---
#### 2. **TDS Receivable as Current Asset:**
* TDS deducted is not an expense; it is a tax credit available to the distributor.
* Show TDS receivable under **Current Assets** in the balance sheet until it is claimed/refunded.
---
#### 3. **When Filing Income Tax Return:**
* The distributor can claim the TDS credit against their tax liability or claim refund if excess deducted.
* TDS is not deducted by distributor but by principal company on their behalf.
---
### Example:
Suppose commission is ₹10,000 and TDS @5% deducted ₹500.
**Journal:**
```
Bank A/c Dr. 9,500
TDS Receivable A/c Dr. 500
To Commission Income A/c 10,000
```
---
### Practical Notes for Distributor:
* Maintain TDS certificates (Form 16A) from the principal company.
* Match TDS entries with Form 26AS while filing return.
* If TDS is not reflected, request the principal company to file TDS returns correctly.
---
### Summary:
* ICAI’s accounting standards on revenue recognition and assets apply.
* TDS deducted under 194H is a receivable, not an expense.
* Commission income is recorded gross.
* Proper documentation and TDS certificate collection is important.
---
If you want, I can help draft accounting entries or suggest how to treat these in your books. Would that help?
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