Tds u/s 194c v/s adjusting events

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2012 AS per AS-4 adjusting events are reqd to be adjusted in the b/sheet date itself so suppose a particular contract which is an adjusting event and also attract TDS U/s 194C then if the same is reqd to be provisioned as on 31.03.2012 in the month of May 2012 (due to adjusting event)then 194C also becomes applicable hence TDS should also have been deducted, which is not possible as due date for the deposit of TDS has expired.
Please advice

Anil Verma

Anil Verma (Expert)
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16 June 2012 Due date to deposit the tax deducted on amount/Income paid in March 2012 and Tax deducted on provisions created in March 2012 is 30.04.2012. This is as per notification 41/2010 dated 31.05.2010
For updattion you can click on (http://taxclubindia.com/simple/tds%20rules%202010-11.pdf)

In old rules due date for tax deducted in month of march was 7 April and date to deposit tds deducted on provision on last day of financial year was 31.05 of next financial year.

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2012 I know the same but suppose in the month of May I have to make adjustmne t as on the b/s heet date i.e 31.03.2012 then how TDS provision would be fullfiled as due date for depositing TDS has expired.

Querist : Anonymous

Querist : Anonymous (Querist)

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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02 August 2025 You're raising a valid and fairly nuanced accounting–tax reconciliation issue: **adjusting events under AS-4** vs **TDS applicability under Section 194C** — especially when the accounting provision is recognized **retrospectively in May** but relates to **March (balance sheet date)**.

Let’s break this down and resolve it clearly.

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## ✅ 1. **What is an Adjusting Event under AS-4?**

As per **AS-4 (Contingencies and Events Occurring After the Balance Sheet Date)**:

> An **adjusting event** is one that provides **additional evidence** of conditions that existed **at the balance sheet date**.

So, if in May 2012 you come to know that a **liability for a contract existed as of 31.03.2012**, you must **account for that liability in FY 2011–12**.

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## ✅ 2. **TDS under Section 194C – Trigger Point**

TDS under Section 194C is applicable **at the time of**:

* **Credit** to the contractor’s account
**or**
* **Payment**, whichever is **earlier**.

So if you're **creating a provision (i.e., crediting the party)** as of 31.03.2012, even **retrospectively**, TDS is **deemed to be required** in **March 2012**.

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## ❌ Issue

You discover the liability in **May 2012**, but the TDS **should have been deducted and deposited for March 2012**, and that due date (**30 April 2012**) has now **passed**.

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## 🧾 Solution: What Should You Do Now?

### 🔹 **Step 1: Deduct TDS now** (in May/June)

* Even if delayed, **you must still deduct TDS** as soon as you recognize the provision.
* Book it with a March date for accounting purposes, but deduct it **now** as per discovery date.

### 🔹 **Step 2: Deposit the TDS immediately**

* Deposit the deducted TDS **as soon as possible**.
* There will be **interest liability** under **Section 201(1A)**:

* **1% per month** from the **date TDS was deductible** (March) to the **date actually deducted**
* **1.5% per month** from the **date of deduction** to the **date of deposit**

### 🔹 **Step 3: File TDS Return with correct dates**

* In your **TDS return**, you must reflect:

* **Date of credit**: 31.03.2012
* **Date of deduction**: actual date in May/June 2012
* **Date of deposit**: actual deposit date

👉 The system will compute **interest liability** accordingly.

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## 📌 Key Point:

> **TDS has to follow accounting treatment** — if a contract expense is booked in FY 2011–12, **TDS must be deducted for that FY**, even if recognized late.

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## ✅ Summary Table:

| Item | Treatment |
| ----------------------------------------------------------------------- | --------------------------------------------------- |
| Provision recognized in May 2012 for contract existing as of 31.03.2012 | Must be **booked in FY 2011–12** as per AS-4 |
| TDS applicability | **Yes**, u/s 194C as of 31.03.2012 |
| Due date for deposit (originally) | 30.04.2012 |
| If missed | Deduct now + deposit + **pay interest u/s 201(1A)** |
| TDS return | File with accurate credit/deduction dates |

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Let me know if you’d like a **sample calculation for TDS interest** or help preparing the return with these special cases.

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