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Deduction of tds from company a & tds cert. in company b

Murali Krishna Koppu (Mgr Fin) (28 Points)

16 June 2014

Hi,

I came across a difficult scenario where i need your help in understanding the same.

My company is acting as an Agent for 3 Principals where my company issues Invoices in the name of 3 principals'. Now the problem is my company is asking us to collect Cheque or DD from our clients in the name of Agent whereas the TDS should be in the name of Principals'.

I am Ok that client will pay Chq or DD in the name of Agent as per understanding but why will he pay TDS in the name of Principal when payment is made in the name of Agent. Please confirm is this possible or not. If it is possible, please let me know the accounting treatment & TDS process how my client should follow.

Please help.

Thanks & Regards,

Murali

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1 Replies

Monalisa Das (Assistant Manager) (62 Points)
Replied 17 June 2014

Sometimes it happens that the TDS is paid by the Agent in the name of the principal is one FY but the same is reverted back to the Agent in the next FY.

It generally happens in the case where a company takes a loan from NBFC. The company pays the TDS on the interest paid to the NBFC by it which the NBFC pays back in the next FY vide cheque. This is done just to avoid inadmissibility of expenses is case of non deduction of TDS.

If it is the same case, then the following accounting entry can be passed:

Principal A/c Dr (amt including TDS)

TDS paid on behalf of Principal Dr

To Bank A/c

Next Year:

Bank A/c Dr

To TDS paid on behalf of Principal