Tds & service tax on provisions

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 If in August 2012 in books of accounts I want to do provision for exps in the month of March 2012 (exps booked in April 2012 on receipt of bill) and if payment for the same exps are done in the month of April ,may 2012 & TDS on the same has been paid on 7th may 2012.then what will be the consequences on TDS provision done now

Amol S Joglekar

Amol S Joglekar (Expert)
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07 August 2012 Difficult to dogest. Sorry to bother you. If TDS is paid on 07/05/2012, what is restricting you from booking the provision in the month of April 2012. Why to wait till August 2012?

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2012 Actually it is related to the month of March & auditors has ask to do provision for statutory audit for F.Y.2011-12

srinath

srinath (Expert)
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07 August 2012 can you please tell the following questions things clearly

When was the provision made
When was TDS paid
When was the amount paid to the party
Did you know the name of the party and exact amount to be paid to the party when the provision was made

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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28 July 2025 Thanks for the clarification! Since this is about **provision for statutory audit fees for FY 2011-12**, here’s a more tailored explanation:

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### Situation:

* Audit fees relate to FY 2011-12 (i.e., expense relates to March 2012 or earlier).
* Bill for audit fees was received and booked in April 2012.
* Payment made in April/May 2012.
* TDS on this payment was deducted and deposited on 7th May 2012.
* Now, in August 2012, auditors are asking you to book a **provision for audit fees for FY 2011-12** (which presumably was not provided for earlier).

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### What this means for **TDS and accounting**:

1. **For TDS**:

* TDS obligation arises on **credit or payment, whichever is earlier**.
* Since the audit fees were **credited and paid in April-May 2012** and TDS was deducted and deposited on 7th May 2012, the TDS liability is **discharged** for that expense.

2. **Provision in August 2012** for FY 2011-12 audit fees is an accounting entry to reflect the **expense related to FY 2011-12 properly in the books**.

3. Since TDS was already deducted on payment, **no fresh TDS deduction is required on this provision** booked in August 2012.

4. From an **accounting perspective**, booking provision in August will increase your expenses for FY 2012-13, but **auditors want the provision so the expense is reflected in correct financial year (FY 2011-12)**.

5. For this purpose, you may need to **adjust the books** by creating a provision entry in March 2012 or disclose the adjustment in audit notes, depending on accounting policies.

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### Summary:

* **No additional TDS payment or deduction** is required when you book provision in August 2012 for audit fees related to FY 2011-12, because TDS was already deducted at payment time in May 2012.
* The **provision is purely an accounting treatment** to recognize the expense in the correct year.
* Auditors want this for compliance with **accrual accounting principles** and correct financial reporting.
* Make sure the **TDS return filed for May 2012 reflects the TDS payment** correctly.

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If you want, I can help with the **provision journal entries** or **disclosure wording** for auditors!

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