TDS entry
This query is : Resolved
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
(Expert)
29 April 2011
IF COMPANY HAS MAINTAIN PROFIT AND LOSS APPROPRIATION A/C
PROFIT AND LOSS APPROPRIATION A/C DR-
TO TDS PAYABLE
PROFIT AND LOSS APPROPRIATION A/C DR-
TO TDS PAYABLE
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**:
---
### ✅ **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
```
---
### 📌 **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.
---
### 📘 **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.
---
### 🧾 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
```
---
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.
---
### ✅ **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
```
---
### 📌 **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.
---
### 📘 **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.
---
### 🧾 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
```
---
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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