Salary accrual & tds on this

TDS 892 views 4 replies

Murali Anur

Managing Director

25 Points Joined March 2009

Dear Members,

I have a typical problem in our company. We are a startup firm and like any other startup we do have cash flow issues.

Due to this all the 3 directors, who were supposed to take Rs. 1.40 lacs salary per month decided to take only Rs. 40,000/- per month. Since there was not even enough cash for this, we accrued the salary as payable and paid TDS accordingly as per the rule.

But we didnot accrue the balance Rs. 1.0 Lac salary, as we were not in a position to pay TDS for that salary. So what we did was we had a board meeting and in that meeting it was discussed and resolved that this balance Rs. 1.0 Lac salary shall be accrued & TDS paid as & when the company financial condition improves.

So my questions are,

1) Can we accrue the salary as & when we want and pay the TDS irrespective of the financial/assessment year?

2) If it can be done, then what rates of TDS has to be deducted and paid

3) If it cannot be accrued then what is the alternate solution.

Please let me know as this is becoming a very critical for our accounting actions.

If you wish you can respond back to me on murali at gppc dot in

regards,

Murali.

Replies (4)

Mihir

Wealth Manager

5293 Points Joined December 2008

If you are following accounts on accrual basis, then you must be booking the expenses of director remuneration of Rs. 140,000/- every month, and paying TDS of Rs. 30,556/- approx every month. Since the company is unable to pay, the Director Remuneration payable ledger will have a credit balance at the end of the year. But, you would have already paid all the TDS payable on the salary for the year, and can issue Form 16.

vishnupriya

CA Final

1418 Points Joined July 2009

You can accrue the salary but you cant pay the TDS in any FY as and when you want. ie As per Sec 40(ia) if you want that salary expenditure of Rs.1.4 Lacs to be allowed as expenditure you have to pay TDS on that amount within duedates specified.

Murali Anur

Managing Director

25 Points Joined March 2009

Originally posted by : Mihir
	If you are following accounts on accrual basis, then you must be booking the expenses of director remuneration of Rs. 140,000/- every month, and paying TDS of Rs. 30,556/- approx every month. Since the company is unable to pay, the Director Remuneration payable ledger will have a credit balance at the end of the year. But, you would have already paid all the TDS payable on the salary for the year, and can issue Form 16.

Thanks for the quick response. The issue is we didnot have even enough cash flow to pay the TDS. Hence we have not accrued the Rs. 1.0 lacs salary in accounts. But we made a board resolution to accrue it & pay TDS when situation improves.

So assume for salary from April 2010 to July 2011, can I accrure the salary in August 2011 and pay the complete TDS with penalty?

Let me know.

Mihir

Wealth Manager

5293 Points Joined December 2008

You can pay salary as and when cashflow improves because you have already booked your full director remuneration expenses of Rs 140,000/- every month. But, if you pay TDS late, it will attract penalty, interest.