TDS related Query_Liquidated Damages
This query is : Open
26 June 2026
The taxable value of the assets is ₹10,00,000, with GST amounting to ₹1,80,000, making the total invoice value raised by the supplier ₹11,80,000.
During payment processing, it has been observed that the department has proposed to deduct Liquidated Damages (LD) of ₹50,000 on account of delay in the supply and installation of the assets.
As per my understanding, TDS under the Income Tax Act @2% and TDS on GST @2% should be deducted on the original taxable value of ₹10,00,000.
However, my reporting officer is of the view that TDS and TDS on GST should be deducted on the taxable value after adjusting the LD amount, i.e., ₹9,50,000.
In my opinion, Liquidated Damages are in the nature of compensation for delay and should not result in a reduction of the taxable value of the asset for the purpose of TDS deduction. Please suggest.
During payment processing, it has been observed that the department has proposed to deduct Liquidated Damages (LD) of ₹50,000 on account of delay in the supply and installation of the assets.
As per my understanding, TDS under the Income Tax Act @2% and TDS on GST @2% should be deducted on the original taxable value of ₹10,00,000.
However, my reporting officer is of the view that TDS and TDS on GST should be deducted on the taxable value after adjusting the LD amount, i.e., ₹9,50,000.
In my opinion, Liquidated Damages are in the nature of compensation for delay and should not result in a reduction of the taxable value of the asset for the purpose of TDS deduction. Please suggest.
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