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Help plz. effect for tds deducted by us in final accounts

jafer (studies) (194 Points)

17 December 2012

Hello sir/madam,

1)When Tds is deducted on our income receivable, the same will be shown in balance sheet as deduction from Capital account. Now, when we deduct tds while making payment, where it will have the effect on final accounts?

2) Tds has to be deducted including service tax or not ? for ex : invoice rec. is Rs.1000/- service tax Rs. 126 = 1126/- how much tds I should deduct @ 2% i should deduct Rs. 20 on Rs. 1000 or Rs. 22.52 on 1126/-

Thanks in advance

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2 Replies

CA CS Chirag (Practicing CA) (834 Points)
Replied 17 December 2012

1) it will be shown on current liability side and cash or bank will be credited on payment.

2)CBDT Circular: CIRCULAR NO. 4/2008, (dated 28.04.2008) Representation / letters have been received in the Board seeking clarification as to whether TDS provisions under Sec. 194- I of the Income-tax Act will be applicable on the gross rental amount payable (inclusive of service tax ) or net rental amount payable (exclusive of service tax ) The matter has been examined by the Board. As per the provisions of 194-I, tax is deductible at source on Income by way rent paid to any resident. Service tax paid by the tenant doesnt partake the nature of income of the landlord. The landlord only acts as a collecting agency for Government for collection of service tax. Therefore, it has been decided that TDS under Sec 194-I of Income-tax Act would be required to be made on the amount of rent paid / payable without including the service tax.

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Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 17 December 2012

When someone has deducted Tax at source from your inomce, then you need to show it as an Current Asset, as you are eligible to claim credit for this from your total tax liability. In the subsequent eyar when you prepare the accounts the TDS receivable shud be transferred to Capital Account , or if Provision for taxation is being created, then TDS shud be adjsuted against the provision for tax.

When you deduct tax of someone's else then you shud shw the TDS payable as a Current Liability. The gross expense will be debited to P&L Account.

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