Shine Pvt Ltd make a payment for office rent of Rs 80,000 per month to the owner of the property. TDS is required to be deducted at 10%. Shine Pvt ltd must deduct TDS of Rs 8000 and pay the balance of Rs 72,000 to the owner of the property. Thus, the recipient of income i.e. the owner of the property in the above case receives the net amount of Rs 72,000 after deduction of tax at the source. He will add the gross amount i.e. Rs 80,000 to his income and can take credit of the amount already deducted i.e. Rs 8,000 by shine Pvt ltd against his final tax liability.
So in the property owner boos,
Dr. Bank 72k
Cr Income 80k
Dr. TDS receivable 8k- Until they receive a TDS certificate
in tenants books
Dr. Rent expense 80k
Cr. Bank 72k
Cr. TDS payable 8k
This is what I know. How will you add it to income tax liability like the above example mentions.
CAclubindia
