TDS on advance payment to professionals

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2011 Dear sir,

My question in, is it required to deduct TDS on advance amount paid at the time of contract/service agreement with contractor or professionals.

Suppose, if we entered a service agreement with a legal professional, value Rs.10,00,000-00, as per agreement it is compulsory to pay advance 40% of 10 lacs, i.e4,00,000-00.

Is it compulsory to deduct TDS on advance payment of 4 lakhs?

If yes, we should add service tax 10.3% to 4 lacs advance payment while deducting TDS?

Please clarify sir,
Thanks in advance...
swakar.

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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14 March 2011 Q1 > yes. Its mandatory to deduct TDS at the time of payment or credit to party, whichever is earlier.

Q2> NO. Service tax is not to be added on the payment as at the time of making advance payment, you are not booking the expense & hence you are not levying any service tax. So, tds on the advance payment only should be deducted.

Rajan Kapoor

Rajan Kapoor (Expert)
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14 March 2011 TDS is deducted on the date of credit or payment whichever is earlier.

In your case TDS should be deducted on payment date on actual paymenet of Rs. 4 lacs. No need to add service tax for TDS deduction.