Query regarding Taxability of Contingent Income billed in Advance

Hi, thank you all for the help.

However let me clarify the query, the sales is booked, so revenue is booked, now we need to create a provision or charge the PnL in a way to create provision of this 10 years receivable.

If we would have raised invoice for 80% value, we would get payment of 80% of this 80% invoice. Hence there was no option for us apart from raising this full 100% invoice.

So request you to pl help with regard to provisioning against this future contingent recovery of billed amount.

Based on discussion with some practicing CAs this is how we are treating it:

1. Debtor Retention Ac debit (20% amount) to Debtor Account Credit (20% amount)

2. PnL Account / Maintenance Expenses (direct expense) debit to Provision for Maintenance Expenses Credit (same 20% amount)

This way debtor balance as on date is coming correctly and also we have now created a provision which will be reversed each year by the amount we bill.

Now let's see if income tax dept has issue with this I'm future ;)

 terms of payment  are not proper.

change the terms as 80% of contract value in place of 80% of bill value.

since you you will perform maintenance work in coming years, there is no point of paying gst and income tax on it in this year.