TDS Recoverable

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GAURAV GUPTA

GAURAV GUPTA (Querist)
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16 June 2008 Nature of Tds recoverable amount?
How this account is finally settled?

guru santhanam

guru santhanam (Expert)
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16 June 2008 Hi Gaurav,

TDS Recoverable amount is in the nature of Advance. Since we adjust this TDS Recoverable on our Income Tax liability, this amount is treated as Advances or other advances in Balance sheet.

Industry practice is to name this account along with the F.Y.
For Eg:- TDS Recoverable A/c 2008-09
TDS Recoverable A/c 2007-08...

These accounts remain as advance until that F.Y. assessment order is received from Income Tax.

For Eg: 2008-09 F.Y.
Tax Liability calculated is Rs.15000/-
TDS Recoverable A/c 2008-09 is Rs. 4000/-
TAX payable is Rs.11000/- as CASH

TDS recoverable i treat it has tax paid already, hence deducted from Tax liability to calculate TAX Payable

At the end of the year-----2008-09
Balance sheet shows...Provision for Liablity as Rs.15000/- and TDS Reco as Rs.4000/-

In the next year--------2009-10
(since balance sheet is closed, tax payment happens next year)

Rs.11000/- is paid and Debited to Self Assessment Tax Paid A/c. (Treated as Advance A/c)

After one year----------2010-11
When the assessment order is received. AO confirms this amounts and passes the order.
It means he has accepted the TDS recoverable amount without any issues. So, TDS which we treated as advance has helped us from settling our tax liability of 2008-09 year.

Entry will be----

DEBIT Provision for Tax Rs.15000/-

CREDIT TDS Recoverable (2008-09) Rs.4000/-
CREDIT Self Assessment Tax Paid Rs.11000/-

As you can see, all the accounts gets knocked off....
This is done because, unless Assessing Officer issues Assessment Order...our liability or TDS amount is not confirmed. That is why, it is kept alive until the receipt of order.

Hope this clarifies your doubt

Regards,
guru

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guru santhanam

guru santhanam (Expert)
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16 June 2008 Reply me if you are ok or not ok.

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