Tds on provisions as on 31.03.12

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 April 2012 Dear sir,
I have joined recently a new MNC co. I observed following in respect of TDS on Provisions as on 31.03.2012. . .

Here they make entire provsions (approx)under respective heads w/o TDS. However on 1st April they reverse it as it is. But they deduct TDS against actual bills booking in April those are pertains to last F.Y. and pays the TDS on 30/04/2012.

However, all those bills are debited to expense & credited to vendors accounts in april. Under this scenario over provision gets disallowed for last F.Y.

In my opinion, we should deduct TDS on entire provn. and whatever TDS paid shall be debited to Vendors accounts. even less bills are recd. in April against actual provn.

Kindly advise me in the above scenario.

thnx/
Narendra Bandhankar.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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05 April 2012 Income tax deduction under the sections applicable for a business man is based on the principle that "deduction shall be made at the time of credit or payment which ever is earlier". Therefore, tax deduction has to be done on 31/03/2012 itself, since a credit entry goes to the concerned party's account before the actual payment. In other words, your understanding of the TDS provision seems to be correct.

CA Kishore Tallam

CA Kishore Tallam (Expert)
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05 April 2012 If the Company is making a blanket provision of expenses i.e. not making a provision for ascertained amount for a specific party, then TDS need not be deducted.
i.e. If the payee is uncertain, then deduction of TDS is not required.
However, the provisions made in books are disallowed for Income tax computations.

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