Tds on provision of expenses
This query is : Resolved
08 April 2018
Whether partially received services are considered for TDS Expense provision at the year ends or not??
08 April 2018
If you paid amount for such sercice then you have to make TDS provision....
Message likes :
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08 April 2018
Thank you madam for the reply.In case no payment has been made through advance and invoice has not yet been received as well ,for the partially received services against a PO. Shall we deduct TDS then??
27 July 2025
Great follow-up — this is a nuanced but important issue in **TDS on provisions at year-end**, especially in cases of **partially received services** without invoice or payment.
Let’s break it down:
---
## ❓**Scenario:**
* **Services partially received** by 31st March (e.g. under a PO or contract)
* **No invoice** received as of year-end
* **No advance** or payment made yet
* You follow **accrual accounting** (most companies do)
---
## ✅ **Do you need to deduct TDS?**
### ✔️ **YES — if services are partially rendered and expense is booked.**
As per **Section 194C/194J/194I**, TDS is to be deducted **at the time of credit or payment**, whichever is earlier.
If you are **aware that a liability exists** (even partially), and you’re recognizing **partial expense** in the books at year-end — then:
> 🟢 You **must deduct TDS** on that provisioned amount — even if no invoice is received or payment is made.
---
## ✅ Why?
* The **moment you create an expense liability**, you are "crediting" the party (or expense), which **triggers TDS**.
* TDS is **not invoice-dependent** — it is **based on accrual/accounting entry**.
* CBDT and court rulings have clarified this — **TDS applies even on year-end provisions** if expense is booked.
---
## ❌ When **TDS is NOT required**:
If:
* No part of the service is received, and
* No liability is booked (no provision made), and
* No payment or advance is made
Then **TDS is not required** — because neither **credit nor payment** has happened.
---
## 📝 Practical Recommendation:
1. If you’re passing an expense provision (even estimated), **mention the vendor’s name** and deduct TDS.
2. If you cannot identify the vendor or amount reliably, and no expense is booked — **you can wait**.
3. If vendor PAN is not available, deduct TDS at higher rate (20%) and update later if needed.
---
### 📘 Example Entry (Partial Expense):
Say you received 60% of a professional service worth ₹50,000:
* Provision = ₹30,000
* TDS u/s 194J = 10% = ₹3,000
```
Professional Expense A/c Dr ₹30,000
To TDS Payable A/c ₹3,000
To Vendor A/c (or Provision A/c) ₹27,000
```
> Later when actual invoice comes, adjust the balance.
---
## ✅ Summary:
| Condition | TDS Required? |
| --------------------------------------------------- | ------------- |
| Partial services received, expense provision booked | ✅ Yes |
| No service received, no provision made | ❌ No |
| Payment/advance made (even without invoice) | ✅ Yes |
---
Let me know if you need a **template for journal entries** or **TDS timelines** for year-end provisions.
Let’s break it down:
---
## ❓**Scenario:**
* **Services partially received** by 31st March (e.g. under a PO or contract)
* **No invoice** received as of year-end
* **No advance** or payment made yet
* You follow **accrual accounting** (most companies do)
---
## ✅ **Do you need to deduct TDS?**
### ✔️ **YES — if services are partially rendered and expense is booked.**
As per **Section 194C/194J/194I**, TDS is to be deducted **at the time of credit or payment**, whichever is earlier.
If you are **aware that a liability exists** (even partially), and you’re recognizing **partial expense** in the books at year-end — then:
> 🟢 You **must deduct TDS** on that provisioned amount — even if no invoice is received or payment is made.
---
## ✅ Why?
* The **moment you create an expense liability**, you are "crediting" the party (or expense), which **triggers TDS**.
* TDS is **not invoice-dependent** — it is **based on accrual/accounting entry**.
* CBDT and court rulings have clarified this — **TDS applies even on year-end provisions** if expense is booked.
---
## ❌ When **TDS is NOT required**:
If:
* No part of the service is received, and
* No liability is booked (no provision made), and
* No payment or advance is made
Then **TDS is not required** — because neither **credit nor payment** has happened.
---
## 📝 Practical Recommendation:
1. If you’re passing an expense provision (even estimated), **mention the vendor’s name** and deduct TDS.
2. If you cannot identify the vendor or amount reliably, and no expense is booked — **you can wait**.
3. If vendor PAN is not available, deduct TDS at higher rate (20%) and update later if needed.
---
### 📘 Example Entry (Partial Expense):
Say you received 60% of a professional service worth ₹50,000:
* Provision = ₹30,000
* TDS u/s 194J = 10% = ₹3,000
```
Professional Expense A/c Dr ₹30,000
To TDS Payable A/c ₹3,000
To Vendor A/c (or Provision A/c) ₹27,000
```
> Later when actual invoice comes, adjust the balance.
---
## ✅ Summary:
| Condition | TDS Required? |
| --------------------------------------------------- | ------------- |
| Partial services received, expense provision booked | ✅ Yes |
| No service received, no provision made | ❌ No |
| Payment/advance made (even without invoice) | ✅ Yes |
---
Let me know if you need a **template for journal entries** or **TDS timelines** for year-end provisions.
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