Tds not deducted

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Himanshu Sharma (Querist)
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07 April 2018 one invoice issued by ABC CO. to us on A/c of SOFTWER (ON CONTRACT) partialy of Rs. 150000/- and till now we paid Rs. 150000/- to them and by mistake we forgot to deduct TDS, now,we hv not deducted TDS and also paid the full amount to ABC CO. please guide what we do next. please provide me solution as soon as possible

Guest

Guest (Expert)

07 April 2018 First, you need to deposit TDS with interest. Then you can issue a debit note to the vendor for recovery of excess payment.
Or, take the longer process of taking form 26A from the vendor.

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Himanshu Sharma

Himanshu Sharma (Querist)
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14 April 2018 I have already deposit Tds with interest but not raise a debit note to vendor, bcus vendor wind up their business. so what i do i do the Tds amount which we deposit from own pocket & entered in cash in our accounts books so that our account are tally. is that right way or not.

thank you so much Mr. Manish

Guest

Guest (Expert)

14 April 2018 Then the tax deposited is your expense. Show it in your profit and loss account. However, you can not claim its deduction in profit calculation for income tax.

Himanshu Sharma

Himanshu Sharma (Querist)
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14 April 2018 so sir what we do please guide me. for better option

Guest

Guest (Expert)

14 April 2018 See if you can discuss this with your vendor to pay you back the amount. As you've deposited his tax. He can claim that in his ITR.

Himanshu Sharma

Himanshu Sharma (Querist)
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14 April 2018 Thank you Mr. Manish but his already denied for that. we can already talked with them

Guest

Guest (Expert)

14 April 2018 Sorry, I don't know other recourse? Wait if another expert reply.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Hi, and thanks for the clear explanation. You've already taken most of the right steps. Let’s walk through this properly and answer your main concern:

---

## ✅ **Your Situation in Summary:**

* You received an invoice of ₹1,50,000 from ABC Co. for software (under contract).
* You **paid full amount** without deducting TDS — which should have been done under **Section 194J or 194C**, depending on nature of service.
* You later realized the mistake and:

* **Deposited the TDS** amount **with interest**.
* **Did not raise a debit note** because the vendor **has shut down**.
* You’ve **borne the TDS from your own pocket**, and now want to **adjust it in accounts** (entered it in cash book to tally).

---

## ✅ **What You Did Right:**

1. **Depositing TDS with interest** is **mandatory** under the law (Section 201).
2. Not raising a debit note is okay, given the vendor has wound up.
3. You took on the TDS burden yourself — that’s acceptable from a tax compliance standpoint.
4. You want to account for this TDS paid properly in your books — also good thinking.

---

## 📌 What You Should Do Next (Accounting Treatment):

Since you paid ₹150,000 in full and later deposited TDS from your own funds, you **should not enter this under “cash”** casually. Instead:

### 🔹 Recommended Accounting Entry:

You can book it like this:

```
TDS Receivable A/c Dr. ₹15,000
To Bank A/c ₹15,000
(Being TDS paid on behalf of vendor ABC Co., borne by us)
```

* This creates a **TDS receivable** entry in your books (i.e., you paid tax on behalf of someone).
* Since the vendor no longer exists, you can consider writing it off later as **business expense** or **bad debt** (with auditor's advice).

If you don't want to create a receivable:

### 🔹 Alternative Entry (Write it off as expense):

```
TDS Expense A/c Dr. ₹15,000
To Bank A/c ₹15,000
(Being TDS on vendor payment borne by us due to non-deduction earlier)
```

✔️ This reflects the TDS as a **business expense**, and your accounts will still tally.

---

## 🔁 Important Notes:

* **File the TDS return (Form 26Q)** for that quarter, showing the deduction.
* The vendor **won’t get credit** in their 26AS (but since they’ve shut down, that’s irrelevant now).
* Keep **proof of payment** of TDS + interest in case of future scrutiny.
* Document internally why debit note wasn’t raised — due to winding up of vendor.

---

## ✅ Final Answer:

Yes, it's acceptable to bear and book the TDS yourself. **Do not show it as simple "cash" spent**. Instead, either:

1. **Create a TDS Receivable (if you plan to recover or show it as recoverable)**
2. Or, **book it as an Expense** (if it's a sunk cost).

Let me know if you want a **journal voucher format** or assistance preparing the **TDS return** for this.

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