Tds on zero balance a/c in current bank a/c

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This query is : Resolved

Sonali (Querist)

06 June 2012 if a Company holds a current a/c which gives a sweep everyday to its sister concerns.at the end of the month there is an interest charged on this daily in and out activity of money from parent--to --sister soncern and back again from sister---to --parent A/c . so does the parent Company need to pay the TDS on the Sweep Inerest charged by the bank. this TDS on interest is shown receivable from its sister concern in the books of PArent Company.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

06 June 2012 TDS is not applicable on interest paid to a bank.

Sonali

Sonali (Querist)

06 June 2012 Hi Siddharth,
Here the interest paid to bank is on behalf of the child companies. so the parent Co is charging the Child Co for usinf its money. the a/c goes as follows:
Parent Co Books:
Intercompany receivable A/c CR
Bank A/c Dr
TDS receivable A/c Dr

Child Co books:
Intercompany Payable Dr
To bank A/c Cr
To TDS on ZBA int Cr

In this case, the child Company is paying the TDS to bank.
whereas the Parent company is also paying TDS receivable to bank.
Is this correct?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

06 June 2012 You have misunderstood the transactions.

The TDS is NOT on interest paid to the bank.

The TDS is deducted by the child company on the charges levied by the parent company.

Deductor - child company
Deductee - parent company

TDS deducted by child company is a liability and accordingly is appearing as a credit item.

The TDS deducted by the child company is an asset for the parent company and is appearing as a debit item.

I hope now it is clear.

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