Tds recovery

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 Dear Sir ,

We have paid TDS for 2013-14 for our Employees . Now we want to recover that TDS Amount .So what will be the Entry while paying that amount if we will recover that particular amount while paying the Salary ?

We made Bank transfer for Salary .

For Example : Employee - A Gross Salary Rs.30,000.00 TDS Recovery - 4290.00 Net Bank Transfer Rs.25710.00

Kindly Explain.........

CA Devanand Jethanandani

CA Devanand Jethanandani (Expert)
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18 September 2014 Dear friend,

While deducting and depositing tax of those employees (lets say Mr. A) you must have passed below entry,

Employee (Mr. A) A/c. Dr.4290
To TDS payable Cr.4290

TDS payable Dr.4290
To bank Cr.4290

When salary becomes due pass below entry.
Salary A/c. Dr.30,000
To employee Mr. A Cr.30,000

And while recovering the same from salary payment, pass below entry.
Employee (Mr. A) A/c. Dr.25,710
To bank Cr.25,710

Querist : Anonymous

Querist : Anonymous (Querist)

19 September 2014 Dear Sir ,

We have deposited Employee TDS & now we want to RECOVER FROM him. So May I generate TDS Recoverable A/c ? & If yes then TDS Recoverable A/C under which group of Balance Sheet ?

Kindly explain.......

CA Devanand Jethanandani

CA Devanand Jethanandani (Expert)
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19 September 2014 Dear friend,

There is no need to create such account of TDS recoverable.

And tell me which entry you passed on depositing TDS ?

Querist : Anonymous

Querist : Anonymous (Querist)

06 October 2014 Dear Sir ,

May I pass entry as

Employee A/C DR. 30,000.00
Bank A/C Cr. 25710.00
Other Income A/c Cr. 4290.00
(Under P&L Indirect Income)

Kindly Explain.....

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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28 July 2025 Great question! Let me help clarify the correct accounting treatment for **TDS deducted from employees' salary and its recovery**.

---

## Scenario recap:

* Gross Salary: ₹30,000
* TDS deducted & deposited by employer: ₹4,290
* Net salary paid to employee: ₹25,710

---

## 1. **When TDS is deducted and deposited:**

You first recognize that employee owes the TDS amount, and employer deposits it to the government.

**Journal entries at the time of TDS deduction:**

```plaintext
Dr Salary Expense A/c 30,000
Cr Employee Payable A/c (Gross Salary) 30,000
```

Then, split the employee payable into net payable and TDS payable:

```plaintext
Dr Employee Payable A/c (Gross Salary) 30,000
Cr Bank A/c (Net salary paid) 25,710
Cr TDS Payable A/c (liability) 4,290
```

Then, when TDS is deposited to government:

```plaintext
Dr TDS Payable A/c 4,290
Cr Bank A/c 4,290
```

---

## 2. **When recovering TDS from employee salary:**

Actually, the **TDS is deducted from salary before paying employee** (so net salary is paid).

Hence, the employer’s liability is only for the **net amount to be paid to employee**, and TDS amount is paid directly to the government on employee’s behalf.

You **don’t need a separate TDS Recoverable account** because TDS deducted is already part of salary expense but paid directly to government.

---

## 3. **Addressing your proposed entry:**

> Employee A/C Dr. 30,000
> Bank A/C Cr. 25,710
> Other Income A/C Cr. 4,290

This entry is **incorrect** because:

* The full salary is an expense, not a receivable from employee.
* TDS is deducted from employee salary (liability), not treated as income.
* TDS deducted is a liability (TDS Payable), not income.

---

## **Summary of correct accounting flow:**

| Step | Debit | Credit |
| ---------------------------- | -------------------------- | -------------------------------- |
| Salary expense recognized | Salary Expense A/c ₹30,000 | Employee Payable ₹30,000 |
| Split payable into net & TDS | Employee Payable ₹30,000 | Bank ₹25,710; TDS Payable ₹4,290 |
| Deposit TDS to government | TDS Payable ₹4,290 | Bank ₹4,290 |

---

## 4. **No need for TDS Recoverable account**

* Because TDS deducted is part of employee salary liability.
* You already reduced payable to employee by TDS amount.
* TDS payable is deposited to tax authorities directly.

---

If you want, I can provide sample accounting entries in your accounting software format or help with journal vouchers!

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