tds queries
This query is : Resolved
30 October 2008
Hai friends
I have come across a problem. A sole proprietorship is converted into a company. after that all income and expenses are booked in the name of the company. But the company forgot to intimate it to their clients and they continued making payments in proprietor's name. Actually the income is booked in the name of the company. But the problem came when the client issued TDS certificates in the name of proprietor. They are not willing to change it.
Since the proprietor has no income since all income is booked can he claim refund for the tax deducted in his name.
I have come across a problem. A sole proprietorship is converted into a company. after that all income and expenses are booked in the name of the company. But the company forgot to intimate it to their clients and they continued making payments in proprietor's name. Actually the income is booked in the name of the company. But the problem came when the client issued TDS certificates in the name of proprietor. They are not willing to change it.
Since the proprietor has no income since all income is booked can he claim refund for the tax deducted in his name.
30 October 2008
The TDS if it is on the bill raised by the proprietor company the certificate will be obviously in that name only?
30 October 2008
My question is that can I claim refund for that amount with out showing the income in Proprietor's account since the income has been already booked by the company.
can he claim refund for the tax deducted since certificate is issued in the name of proprietor and not the company
Tax deducted at source has not been shown as an asset for the company since the certificate has been issued in the name of that proprietor
can he claim refund for the tax deducted since certificate is issued in the name of proprietor and not the company
Tax deducted at source has not been shown as an asset for the company since the certificate has been issued in the name of that proprietor
30 October 2008
In order to give reply only I am asking you the question whether the bill was also inthe proprietor,s name. If o you can claim refund.
30 October 2008
The bills was in the name of proprietor but income was recognised by the company
30 October 2008
What about the payment. Whether the client paid the amount by cheque in favour of the proprietor or not.
30 October 2008
Practically, you will have to pay tax on the income booked in the name of company instead of Proprietorship. What is the status of that proprietor in the company ( whether he is a shareholder or a director)? There can be some practical solutions to this problem. The answer to the question asked by Warrier sir can help a lot in this regard.
04 November 2008
In regard to What Warrier Sir has asked, the proprietor is the managing director of the company cum major shareholder of the company
The payment was made in the name of the proprietor
the problem is that the expenses are booked in the name of the company that is why the income cannot be claimed in the name of proprietor.
That is the issue
The payment was made in the name of the proprietor
the problem is that the expenses are booked in the name of the company that is why the income cannot be claimed in the name of proprietor.
That is the issue
27 July 2025
This is a classic issue when a sole proprietorship converts into a company but the clients keep paying and deducting TDS in the proprietor’s name, while the income is actually recognized in the company’s books.
---
### Key points and possible solutions:
1. **Who can claim the TDS credit?**
* **TDS credit is allowed only to the person/entity in whose name the TDS certificate is issued.**
* Since TDS certificates are in the proprietor’s name, **the proprietor is eligible to claim that TDS credit**, but only if the income is also declared in his/her returns.
2. **Income mismatch issue:**
* If income is declared by the company but the TDS certificate is issued in the proprietor’s name, the proprietor’s income tax return will show TDS deducted but no income to offset it against.
* This leads to complications in claiming TDS credit.
3. **What if the proprietor claims refund?**
* If the proprietor claims refund of TDS without showing the income, the Income Tax Department may disallow it since the income and TDS should match.
4. **Recommended approach:**
* **Inform clients about the change:** The best solution is to request clients to issue bills and deduct TDS in the company’s name going forward.
* **Adjust income recognition:** If the company already recognized income, but TDS certificates are in proprietor’s name, then in the proprietor’s return, the income should be reported to claim TDS credit. But this leads to double taxation.
* **Tax professional advice:**
* You may consider treating the amount as income of the proprietor for the period TDS certificates were issued in his name, and then transfer it to company accounts via proper transactions (e.g., capital contribution or loan).
* Or ask clients for revised TDS certificates in company’s name (though they are unwilling here).
* Alternatively, if clients refuse to correct TDS certificates, proprietor may file return showing income matching TDS deducted and claim refund, while company avoids declaring that income again.
5. **Documentation:**
* Maintain clear records of the date of conversion, client communications, and steps taken to rectify.
---
### Summary:
* Since TDS certificate is in proprietor’s name, only the proprietor can claim the TDS credit legally.
* Income and TDS must match for tax authorities to accept the claim.
* It’s important to align billing, payments, and TDS certificates with the actual income recognition.
* Professional tax advice is crucial to avoid double taxation or tax loss.
---
If you want, I can help draft a letter to clients requesting TDS certificates in the company’s name, or help you explore accounting entries to resolve this mismatch. Would that be helpful?
---
### Key points and possible solutions:
1. **Who can claim the TDS credit?**
* **TDS credit is allowed only to the person/entity in whose name the TDS certificate is issued.**
* Since TDS certificates are in the proprietor’s name, **the proprietor is eligible to claim that TDS credit**, but only if the income is also declared in his/her returns.
2. **Income mismatch issue:**
* If income is declared by the company but the TDS certificate is issued in the proprietor’s name, the proprietor’s income tax return will show TDS deducted but no income to offset it against.
* This leads to complications in claiming TDS credit.
3. **What if the proprietor claims refund?**
* If the proprietor claims refund of TDS without showing the income, the Income Tax Department may disallow it since the income and TDS should match.
4. **Recommended approach:**
* **Inform clients about the change:** The best solution is to request clients to issue bills and deduct TDS in the company’s name going forward.
* **Adjust income recognition:** If the company already recognized income, but TDS certificates are in proprietor’s name, then in the proprietor’s return, the income should be reported to claim TDS credit. But this leads to double taxation.
* **Tax professional advice:**
* You may consider treating the amount as income of the proprietor for the period TDS certificates were issued in his name, and then transfer it to company accounts via proper transactions (e.g., capital contribution or loan).
* Or ask clients for revised TDS certificates in company’s name (though they are unwilling here).
* Alternatively, if clients refuse to correct TDS certificates, proprietor may file return showing income matching TDS deducted and claim refund, while company avoids declaring that income again.
5. **Documentation:**
* Maintain clear records of the date of conversion, client communications, and steps taken to rectify.
---
### Summary:
* Since TDS certificate is in proprietor’s name, only the proprietor can claim the TDS credit legally.
* Income and TDS must match for tax authorities to accept the claim.
* It’s important to align billing, payments, and TDS certificates with the actual income recognition.
* Professional tax advice is crucial to avoid double taxation or tax loss.
---
If you want, I can help draft a letter to clients requesting TDS certificates in the company’s name, or help you explore accounting entries to resolve this mismatch. Would that be helpful?
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