Hi Respected members,
Please educate me if the client withhold income tax (TDS), in which account it will be recorded? Further, please let me know will this account go to P&L or BS ?
Thanks in advance for your precious time and efforts to reply of this query.
TDS payment by us is like of Advance tax payment to Govt before assessment.only payment has been done by our clients in Government account therefore It should under advances ,otherwise you Can show under , " Other Current Assets " also .
Dear Prasad Nilugal Sir,
According to that YouTuber reason of this adjustment to get profit after taxation so that it can transfer to proprietor or partners.
I am giving link below of that video for your information and kind comments.
Please watch it from 14:00 and let me know is YouTuber concept is practical?
https://m.youtube.com/watch?v=N8BXLM5qDdI
Dear Parsad Nilugal,
Any reviews on above ?
When a client withholds income tax (TDS), it is typically recorded in a separate account called "TDS Receivable" or "TDS Payable." This account represents the amount of tax withheld by the client on behalf of the taxpayer.
As for the financial statements, the TDS account will be recorded on the balance sheet (BS) as either an asset or a liability, depending on whether the taxpayer is entitled to receive a refund or owes additional tax. It is not recorded on the profit and loss statement (P&L) since it represents a tax liability or an advance payment of tax rather than an expense or revenue item.
P-2
and you have to adjust those tax amount which already deduct by Client in advance how will you account it ?
Yes , You have to deduct all Advance tax paid , TDS deducted by client , Self Assessment Tax paid ( if any ) , while paying the Income Tax assess by the Income tax department in the assessment year . . if you refer ITR2 , ITR3 , ITR4 , ITR6 you will find all these adjustments at the end .
Following manner you have account
So you do not know how much income tax payable to Govt on 31. st march , therefore you have make provision for Income tax on 31st march .
profit & Loss A/c Dr
To provision for Income Tax A/c Cr
( provision for income tax )
also Any Advance tax paid , TDS deducted by client ( as above ) , you have carried forward to next F.Y .
After assessment in the next year , pass adjustment entries as follows
provision for Income Tax A/c Dr
To Advance Tax A/c Cr
To TDS deducted A/c Cr
To income Tax payable A/c Cr
( income tax payable after adjustments )
Income tax payable A/c Dr
To Bank A/c Cr
( Income tax for last F.Y paid )
Confirm with company CA as well .
CAclubindia
