TDS on payment on behalf of other
This query is : Resolved
02 January 2010
Our Client "A" is deducting TDS on payment, on behalf of their group companies and raising debit note to group companies, in this case:
1) is tds on whole amount is allowable to "A"? and
2) are group companies liable to deduct tds on payment to "A"?
1) is tds on whole amount is allowable to "A"? and
2) are group companies liable to deduct tds on payment to "A"?
11 January 2010
Your question is little confused, What is meaning of allowable
27 July 2025
Great question! Here’s the clarification on **TDS deduction when payment is made on behalf of group companies:**
---
### Scenario:
* Company **A** pays a vendor and deducts TDS on the entire payment amount.
* Company **A** then raises a debit note to its **group companies** (say B, C, D) for their respective shares of the payment.
---
### 1) **Is TDS on the whole amount allowable to Company A?**
* **Yes, Company A can claim the credit for TDS deducted on the full amount** paid to the vendor because the payment was actually made by Company A.
* The tax deducted at source is credited to the PAN of the person/entity deducting the TDS, i.e., Company A.
* Company A will get TDS credit against its own tax liability.
---
### 2) **Are group companies liable to deduct TDS on payment to Company A?**
* Yes, **group companies (B, C, D) need to deduct TDS on the amount they pay to Company A** (i.e., on the debit notes raised by A).
* This is because **the payment from group companies to Company A is a separate transaction** and is subject to TDS as per applicable sections.
* So, TDS has to be deducted again at the time of payment to A by the group companies.
---
### Summary:
| Aspect | TDS Treatment |
| -------------------------------------------------- | ------------------------------------------------------------ |
| Payment & TDS by Company A | TDS deductible and credit allowed to Company A |
| Debit note payment by group companies to Company A | Group companies must deduct TDS on amounts paid to Company A |
---
### Important points:
* Company A should provide **TDS certificates** to group companies for the TDS it has deducted on vendor payments.
* Group companies should account for TDS on payments to A, as they are making a fresh payment.
* This ensures TDS is correctly deducted on each leg of the transaction and proper credit is available to all parties.
---
If you want, I can help with drafting an example journal entry or provide relevant sections/rules. Would that be helpful?
---
### Scenario:
* Company **A** pays a vendor and deducts TDS on the entire payment amount.
* Company **A** then raises a debit note to its **group companies** (say B, C, D) for their respective shares of the payment.
---
### 1) **Is TDS on the whole amount allowable to Company A?**
* **Yes, Company A can claim the credit for TDS deducted on the full amount** paid to the vendor because the payment was actually made by Company A.
* The tax deducted at source is credited to the PAN of the person/entity deducting the TDS, i.e., Company A.
* Company A will get TDS credit against its own tax liability.
---
### 2) **Are group companies liable to deduct TDS on payment to Company A?**
* Yes, **group companies (B, C, D) need to deduct TDS on the amount they pay to Company A** (i.e., on the debit notes raised by A).
* This is because **the payment from group companies to Company A is a separate transaction** and is subject to TDS as per applicable sections.
* So, TDS has to be deducted again at the time of payment to A by the group companies.
---
### Summary:
| Aspect | TDS Treatment |
| -------------------------------------------------- | ------------------------------------------------------------ |
| Payment & TDS by Company A | TDS deductible and credit allowed to Company A |
| Debit note payment by group companies to Company A | Group companies must deduct TDS on amounts paid to Company A |
---
### Important points:
* Company A should provide **TDS certificates** to group companies for the TDS it has deducted on vendor payments.
* Group companies should account for TDS on payments to A, as they are making a fresh payment.
* This ensures TDS is correctly deducted on each leg of the transaction and proper credit is available to all parties.
---
If you want, I can help with drafting an example journal entry or provide relevant sections/rules. Would that be helpful?
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