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Section 40(a)(ia),

Rajat Singhal CA,CS,CFA (Senior Manager (F&A)) (254 Points)

30 December 2009

Hello FReinds !!

I wanted to know about the procedure for deducting the tds on provisions made on expenses ? Its effect under section 40(a)(ia) ?

Regards

Rajat Singhal

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3 Replies

Sunil Liladhar Kotak (Manager (F & A)) (2025 Points)
Replied 30 December 2009

Dear

Provisions are same for expense which are paid & expenses which are accrued except for the expenses which are accrued in the last month of the financial year i.e. march

sunil

Sunil Liladhar Kotak (Manager (F & A)) (2025 Points)
Replied 30 December 2009

Kindly refere the Ready Reckoner for further details

sunil

Amir (Learner) (4016 Points)
Replied 30 December 2009

Hi Rajat,

Liability to Deduct TDS arise on EARLIST OF FOLLOWING EVENTS:-

a) Credit to supplier ( Entry :- Expense a/c........Dr

To Creditor A/c )

b) Payment to supplier ( Entry :- Creditor a/c ..................Dr

To Bank A/c)

But in case of Provision there is neither Credit nor Payment,

Entry : -Expense a/c...................Dr

To Provision for Expenses

Hence there is no TDS Implication on Provisions..

Now, You might be wondering that how easy is this to avoid/ defer the deduction of TDS that instead of crediting to the account of creditor, expenses should be credited to Provision for Expenses A/c..

BUT MY FRIEND REMEMBER ONE THING THAT PROVISIONS ARE NOT ALLOWED AS DEDUCTION UNDER INCOME TAX ACT (Except in case of Rural Bank Branches)