TDS on Advance payment to Contractor

17 October 2019
I paid a sum of Rs 100000/- to my contractor as advance. But not deducted TDS.

Wanted to rectify error how much TDS to be deducted and deposited and what will be the accounting entries passed.

Please suggest

RAJA P M (Expert)

Click to Talk 17 October 2019
Can you elaborate your query with more details....

18 October 2019
TDS to be deducted at the time of payment or accounting which ever earlier. As per section 194 (c) if single contract is more than Rs.30000/- or annual transactions exceeds Rs.1,00,000/-. Hence in the above case,TDS to be deducted at the time of making payment. The rate of deduction is 1% for individual, 2% for firm and corporates. Depending on person TDS to be deducted.
Accounting entry - If TDS deducted at the time of making payment.

Debit - Contractor ( Gross amount)
TDS Payable
Bank account ( Net of TDS).

As the TDS not deducted at the time of making payment, you have to pay TDS now and the entry for the same is given below

Debit contractor - ( For TDS amount)
Credit TDS payable

Entry for TDS payment is
Debit TDS payable
Credit Bank

The TDS paid for Rs.1,00,000 is to be recovered in subsequent payment. The due date of making TDS payment is 7th of succeeding month. If the advance was settled in the last month, TDS to be paid along with applicable interest from 08.10.19 to till the date of making payment

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