Tds on provision entry of exp.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 October 2015 Dear expert,
Professional service was renderd in march 2015, and invoice for the same was received on 19/4/2015, i have following query regarding this..
(1) weather provision entry will be made or not if yes what will be entry.
(2)weather TDS is to be made on provision or not
(3) TDS will be made on the actual payment or credit whichever is earlier, however The provision Entry will be pass as per me...
Prof. Exp. Dr
To provision for exp.
To TDS payable

Plz clarify weather above entry is correct or not if yes plz tell me how the vendor name and his PAN NO. will be mention in TDS return as no vendor name was credited in provision entry....

Thanx & Regard
Vijay Goyal

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 October 2015 1 As service has been provided in March liability has to be created debiting expenses.
2 TDS has to be made on liability created.

3 Liability has to be created under vendor name.

Querist : Anonymous

Querist : Anonymous (Querist)

23 October 2015 Respected sir, plz confirm do we need to pass the following entry on 31/3/2015,
(1) professional exp. DR
to creditor
to TDS payable
or

(2) professional exp. Dr
to provision for exp.
to TDS payable

Plz let me know which entry do we need to pass on 31/3/2015 weather 1 or 2

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Hi Vijay,
Great question — this is a classic scenario that comes up during **year-end closing** and **TDS compliance**.

Let’s answer your queries point-by-point and settle the confusion between using **“Provision for Expenses”** or a **“Creditor (Vendor Name)”** account.

---

## 🔍 **Background Facts Recap:**

* Professional services **rendered in March 2015**
* **Invoice received in April 2015**
* Expense needs to be recognized in **FY 2014–15**
* TDS applicability and accounting entry is being queried

---

## ✅ Answer to Your Questions:

---

### **(1) Should provision entry be passed on 31/03/2015?**

✅ **Yes**, since the service was rendered in March, the **expense must be accounted for in March** (i.e., the same financial year). This is required under the **accrual method of accounting**.

---

### **(2) Is TDS to be deducted on the provision entry?**

✅ **Yes**, TDS is to be deducted **when expense is booked or payment is made, whichever is earlier** – as per **Section 194J** (for professional services).

So, if you're booking the provision on 31/03/2015, **TDS must be deducted in March**, even if the bill comes later.

---

### **(3) Which journal entry is correct?**

Between your two options:

#### ❌ Option (2) – *Not recommended for TDS purposes*:

```
Professional Exp. A/c Dr
To Provision for Exp.
To TDS Payable A/c
```

This is **not ideal**, because "Provision for Expense" is a general liability account and **does not contain the vendor name** — which creates problems for **TDS return filing**.

#### ✅ Option (1) – *Correct and preferred*:

```
Professional Exp. A/c Dr ₹10,000
To Creditor – Mr. XYZ ₹9,000
To TDS Payable A/c ₹1,000
```

This way:

* **Vendor is specifically identified**
* PAN of vendor can be quoted in **TDS return (Form 26Q)**
* TDS credit is properly reflected in vendor's **Form 26AS**

> 📌 **Key Point**: TDS returns (Form 26Q) require vendor name, PAN, and amount paid/credited — so the vendor must be part of the entry at the time of booking.

---

## ✅ Summary of Correct Approach:

| Step | Entry | Notes |
| -------------- | -------------------------------------------------------------------------------- | ------------------------------------- |
| 31-Mar-2015 | **Professional Exp. A/c Dr** To **Vendor A/c** To **TDS Payable A/c** | TDS deducted and vendor name captured |
| 25-Apr-2015 | **Vendor A/c Dr** To **Bank A/c** | Payment made to vendor |
| By 30-Apr-2015 | Deposit TDS to Govt | Through challan 281 |
| Quarterly | File **TDS return (Form 26Q)** | Vendor name & PAN included |

---

## ✅ Action Items:

* Pass entry with **vendor account**, not generic “provision” account.
* Ensure **vendor’s PAN** is available before filing TDS return.
* Deduct and deposit TDS on or before **30 April 2015** to avoid interest.

---

If you don’t yet have the vendor PAN in March, you may:

* Park the entry temporarily under “Provision for Expenses – Vendor XYZ”
* But **revise the entry later** once PAN/invoice is available before filing return

Let me know if you need:

* A sample Excel format for **TDS working**
* Help with **Form 26Q** preparation or validation

You're on the right track — you just need to pass the entry with **vendor name to ensure compliance**.

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