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TDS Claim under Cash System of Accounting

CA RAMESH KUMAR AHUJA (CA, DISA, LLB) (5452 Points)

02 February 2009

Deductee of Tax at Source maintains accounts as per the Cash System of Accounting and fee received for services rendered during FY 2007-08 is received in FY 2008-09. Tax Deducted at Source is also booked in FY 2008-09 while TDS Cerificate has been issued by the deductor for the year 2007-08(AY 08-09). In which year the deductee may claim the adjustment of TDS?

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5 Replies

vinay (Audit Manager) (34 Points)
Replied 02 February 2009

Logically speaking the credit for tax deducted should be taken only when the income is declared for tax purpose... However there are people who show income in year of receipt but claim TDS benefit in the year for which it is received..

Umesh V Naig (Statutory Analyst) (452 Points)
Replied 10 April 2009

Method of accounting two types one is mercantile system ie on accrual basis and the other is cash basis ie receipt basis. Hence whenever there is receipt of revenue the TDS implication is also arises. then accounting is to be simultaneous in the same year.

hope the implication is clear

Vinay Chopra (CA ) (197 Points)
Replied 12 April 2009

As per notification 28/2009 dated 16.03.09 Rule 37 BA credit for tax deducted at source shall be given for the assessment year for which such income is assessable. Hence if an assessee follows cash basis of accounting and recognises income in 2008-09 TDS credit wil be available to him in 2008-09.

shravan (article) (22 Points)
Replied 14 July 2009

take this example

deductor say x ltd. is on accrual sysyem and deducts tds of of ca on audit fees, but the fees on which tdsis decuted is not given in same year, but any how tds decuted is also the fees realised hence should offered for tax in the same year

deepak K Gujrati (CA-practice) (1077 Points)
Replied 14 July 2009

Mr Vinay Chopra is correct. The benefit of TDS will ne given in the year the income is accounted for. However sometimes it has practical difficulties but on proper explanation they allow credit.