Tds u/s 195/15ca/15cb

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This query is : Resolved

C.A. Deepak Kakkar (Querist)

27 June 2013 Consider an example.

Invoice amount $1 Lakh.
Calculate TDS in USD @ 20% = 20,000.
Exchange Rate = Rs.50

Entry as on 1.01.2013:

Expense A/c Dr. 50 Lakh
To Creditor A/c 40 Lakh
To TDS Payable A/c 10 Lakh

Now you have to pay $ 80,000 to the party. TDS will remain Rs. 10 Lakhs only.Rs. 10 lacs TDS has to be deposited by 7th February.

Now on the date of payment for e.g. 31.03.2013, exchange rate is Rs. 55.

Entry :

Creditor A/c Dr. 40 Lakh
Foreign Exchange Fluctuation A/c Dr. 4 Lakh
To Bank A/c 44 Lakh

TDS amount will not be affected by change in exchang rate. The difference is Exchange Loss/Gain.
But in 15CA/15CB we will mention amount in INR as 1,00,000*60= 60 lacs
TDS = 20,000*60= 12 lacs
Net amount= 48 lacs

So, this will give 2 different information to TDS/Income Tax Deptt.one is 10 lacs & other is 12 lacs..

Please suggest!!! How to deal with this practical problem.

Thanks in advance.

Deepak Kakkar

SUGATA

SUGATA (Expert)

29 June 2013 Generally the liability of TDS in foreign payment arise on the foreign currency. The exchange rate on the date of deposit of tax will be your actual liability.
In our company we arent waiting for the 7 th of the next month, we deposit the TDS at the same day when we ramit the payment to foreign vendor so that the exchange rate remain same and our liability will mitigate at the same time.

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