TDS entry

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Akhilesh (Querist)
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29 April 2011 What should be the accounting entries for tds in below circumstances, some demad raised by Income tax dept in resepect of short deposit of tds for FY 2007-08 on 28/2/2011. we have deposited the said amount in march 2011.as this is related with previous year what is the correct accounting entries in this case.

CA Navin Jain

CA Navin Jain (Expert)
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29 April 2011 IF COMPANY HAS MAINTAIN PROFIT AND LOSS APPROPRIATION A/C

PROFIT AND LOSS APPROPRIATION A/C DR-
TO TDS PAYABLE

Akhilesh

Akhilesh (Querist)
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03 May 2011 we are not maintaning PROFIT AND LOSS APPROPRIATION A/C

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 When a **TDS shortfall demand** for a **previous year (e.g. FY 2007–08)** is **paid in the current year (e.g. FY 2010–11 or 2011–12)**, and **no Profit & Loss Appropriation Account** is maintained, here's how to pass the correct **accounting entry**:

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### ✅ **Correct Accounting Entry (if no P\&L Appropriation A/c is maintained):**

#### On payment of the TDS shortfall demand:

```plaintext
TDS Short Payment A/c (or Prior Period Expense A/c) Dr. ₹X
To Bank A/c ₹X
```

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### 📌 **Explanation:**

* Since the TDS payment **relates to an earlier year**, it should not hit the current year’s expense (like salary, contractor, etc.).
* Instead, it should be **recorded as a prior period item** – ideally using a separate ledger such as:

* "TDS Short Payment A/c"
* or "Prior Period Expense A/c"

This ensures transparency for audit and income tax compliance.

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### 📘 **Disclosure in Financials (as per AS-5 or Ind AS-8):**

* If the amount is material, it should be **disclosed separately** as a **prior period item** in the notes to accounts.

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### 🧾 Optional Supporting Entry (if you're using a TDS payable ledger):

If you had originally underbooked or misclassified the TDS liability, you might need to correct it first:

```plaintext
TDS Payable A/c (Prior Year) Dr. ₹X
To TDS Short Payment A/c ₹X
```

Then, when you pay:

```plaintext
TDS Short Payment A/c Dr. ₹X
To Bank A/c ₹X
```

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Let me know if you're using a specific ERP/accounting software (like Tally, SAP, QuickBooks), and I can help with ledger setup and actual input steps.

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