TDS ON WHICH AMOUNT

This query is : Resolved

Gaurav Garg (Querist)
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03 April 2009 HI FRIENDS,
I HAVE A QUERY REGARDING TDS:

X LTD. HAS GOT DONE A FABRICATION WORK FROM A CONTRACTOR Y LTD. INVOICE RAISED BY Y LTD. IS OF RS. 10,00,000.

INVOICE AMOUNT IS IN EXCESS OF JOB ORDER BY RS 50,000. HENCE X LTD. RAISE A DEBIT NOTE ON Y LTD. OF RS. 50,000 ON THE SAME DATE ON WHICH INVOICE IS BOOKED.

NOW MY QUERY IS THAT WHETHER TDS U/S 194C SHOULD BE CHARGED ON RS. 10 LACS OR ON RS. 9.50 LACS.

I KNOW THAT TDS IS TO BE CHARGED ON ANY "SUM" CREDITED TO THE PAYEE ACCOUNT.
BUT IF WE DEDUCT TDS ON RS 10 LACS, IT WILL BE UNFAIR TOWARDS Y LTD. JUST BECAUSE WE ARE BOOKING INVOICE AT FULL VALUE AND THEN RAISING A DEBIT NOTE ON HIM.

SURELY Y LTD. WILL GET THE BENEFIT OF TDS AT THE TIME OF ASSESSMENT. BUT EXCESS TDS CARRIES AN OPPORTUNITY COST IN THE FORM OF INTEREST LOST.

PLEASE ANSWER ELABORATELY.

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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03 April 2009 You are very right. It is unfair to deduct TDs on Rs 10 lacs. As you have already raised a debit note so the net effect in party's account is Rs 9.5 Lacs credit and on which TDS must be deducted.

If you have already deduct TDS then the same should be adjusted to the extent TDS on RS 50000 and issue a certificate to party for the same.

Taranjit Singh

Taranjit Singh (Expert)
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03 April 2009 For more clarification, as return of TDS is filed quarterly, so you can adjust the entry and amount of tds in your books before depositing return.

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