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Cash basis of accounting

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Sandeep

Practice

145 Points Posted on 21 January 2020

Hello Sir,

One of my client has earned commission income of Rs. 2 crore out of which Rs. 1 Crore has been received during the year 2018-19 in bank account.

The company has not deposited the TDS amount deducted to the govt due to the cash crisis in the company.

The Company officers have told us that they will make bank FD for the remaining amount. Now due to this my tax liability has gone up and their is no surety that the bank FD will be matured in the coming year.

I am a regular tax payer for almost 10 years and have followed accural base of accounting. Can i adopt cash base of accounting for better tax planning in this year.

Replies (2)

Quick Summary

This discussion explores whether a business can switch to the cash basis of accounting for tax planning purposes, particularly when facing a cash crisis and TDS non-payment. The consensus is that switching to the cash basis for tax planning is generally not permissible if you've consistently followed the accrual basis. Full commission income must be declared and taxed in the year it's earned, regardless of when it's received.