TDS Section 195 Delay
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Bhavya Babu
(Querist)
16 March 2020
Hi. The client we are auditing has entered a bill received on 26.07.2019 on 22.10.2019. This was a foreign transaction. TDS has been deducted as per Section 195 on the amount in Rs as per FOREX on 22.10.2019. Due to the delay in deduction TDS interest charge of 1% was also made. However my question is since the invoice was supposed to be accounted in July and on that amount TDS was to be deducted shouldnt the TDS accounted in October be the TDS on the amount as per the FOREX in July? Also isnt the expense accounted supposed to be with the rate in July?
I am confused hopefully anyone can help?
I am confused hopefully anyone can help?
CA R SEETHARAMAN
(Expert)
16 March 2020
When payment is made.
25 May 2020
TDS liability should be booked if advance payment is made or the date of raising the Invoice which ever is earlier. Now since the Invoice is for July you need to book the TDS based on July and pay interest accordingly for the delay. Since now you have booked TDS in Oct and since there will be difference in Invoice Value as well as TDS amount which sound not rational and logical. Let's assume Forex rates were down in Oct and IT Dept received less TDS which might create issues with the dept as they will assume avoidance of tax from the business. TDS deduction based on Actual Date of Invoice sounds more logical and rational from my perspective.
25 May 2020
TDS liability should be booked if advance payment is made or the date of raising the Invoice which ever is earlier. Now since the Invoice is for July you need to book the TDS based on July and pay interest accordingly for the delay. Since now you have booked TDS in Oct and since there will be difference in Invoice Value as well as TDS amount which sound not rational and logical. Let's assume Forex rates were down in Oct and IT Dept received less TDS which might create issues with the dept as they will assume avoidance of tax from the business. TDS deduction based on Actual Date of Invoice sounds more logical and rational from my perspective.
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