Avail 20% discount on updated CA lectures for Dec 21 .Use Code RESULT20 !! Call : 088803-20003

ICICI

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Deepali (PRACTISING CHARTERED ACCOUNTANT)     03 February 2012

Tds deductibility

The estimated payment to a Contractor for the year is not going to exceed Rs. 75000/-. Hence no TDS is deducted in the first 2 quarters where the payment has actually not exceeded the threshold limit. But in the 3rd quarter the total payment to the contractor exceeds Rs. 75000/-. How would the TDS liability be determined?

E.g. The following bills have been raised by the contractor:

            Apr    10000

            May  10000

            Jun   10000

            July   10000

            Aug   10000

            Sep   10000

            Oct     10000

            Nov    25000

  1. Whether the TDS has to be deducted on bill to bill basis and interest on the same needs to be calculated from the due date for each month?                             OR
  2. Whether the TDS on the entire amount can be deducted in Nov without any interest payment if the same is paid by 7th of Dec?


 21 Replies

Vineet Goyal

Vineet Goyal (Assistant Manager - Finance & Accounts)     03 February 2012

If you already know that it is going to exceed INR 75000, deduct the TDS from the very begining. However if you have not done this, you can deduct TDS as soon as it crosses INR 75000 and deposit the same by due date without interest. You can opt for 2nd option here.

 

But while filing TDS return, please ensure to put the code of no deduction due to not crossing the limit in the respective line item, otherwise IT dept can calculate interest on this.

Ankit

Ankit (CA, CS)     03 February 2012

THE INCOME TAX ACT SAYS PAYMENT, IF IT EXCEEDS 75000, TDS SHOULD BE DEDUCTED.

IN YOUR CASE, SINCE THE PAYMENT EXCEEDS 75000, TDS HAS TO BE DEDUCTED. THOUGH YOU HAVE NOT DEDUCTED TDS IN THE PAYMENTS MADE IN THE FIRST QTR, THE SAME MAY BE DEDUCTED FROM THE CURRENT PAYMENTS, OR IT MAY BY PAID BY YOU FROM YOUR ACCOUNT AND THE SAME MAY BE RECOVERED FROM THE CONTRACTOR.

HOWEVER, THIS LATE PAYMENT WILL ATTARCT INTEREST AT 1%P.M FOR NON DEDUCTION OF TDS.

SINCE ESTIMATION ERROR CANNOT BE AN EXCUSE FOR NON DEDUCTION OF TDS, THE PAYMENT MUST BE MADE ALONG WITH INTEREST .

3 Like
Harpreet

Harpreet (* * * * * *)     03 February 2012

agreed with Mr. Ankit

Praveen Kumar

Praveen Kumar (Manager - Finance & Accounts)     03 February 2012

Agreed with Mr. Ankit

1 Like
CA Jayesh Shah

CA Jayesh Shah (Professional)     03 February 2012

Dear Ankit, Here it is mentioned by Deepali that payment to contractor is not estimated to cross the threshold limit. But it crossed after some point of time, so person has to deduct TDS on entire amount of Rs. 95000 including Rs. 70000 previous payments and pay to government without Interest.

Vineet Goyal

Vineet Goyal (Assistant Manager - Finance & Accounts)     03 February 2012

No need to pay interest if TDS deducted as soon as it crosses threshold limit.

1 Like
punit

punit (CA final)     03 February 2012

This is also may query from very lon tym but nobody gave me perfect answer but in my opnion int will applky coz error is not exuse..

 

Hari Wadhwa

Hari Wadhwa (CA in Practice)     03 February 2012

 

1) Provisio to Sub Section 5 of Section 194 C read as: -

 

Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds 48b[seventy-fivethousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. 

 

 

2) Interpretation: -

 

The highlighted words above "likely to be credited or paid"  requires the assessee to make an estimation/ predict if any payment is LIKELY TO EXCEED the specified amt which makes the assessee LIABLE (i.e, legislature put an obligation by using the words "shall be liable to deduct") to deduct tds.

 

Thus, the intention is to mandatorily make him liable to deduct tds failing which interest must be paid & hence, cannot be excused by stating estimation error.

 

 

3) Conclusion:-

 

Interest should be paid.

 

 

4) Additionally, if the excuse "it was not expected to us (deductee) earlier that the transaction amt during the yr would exceed the specified limit"  is allowed by the deptt, then, don't you think that everyone.....yes...EVERYONE would intentionally start cheating the revenue by stating the same excuse.

 

2 Like
Niraj Mahajan

Niraj Mahajan (Practising CA)     03 February 2012

Interest will be liable lookin at the frequency and quantum (per month Rs.10,000/-) of amount paid. THUS IT WAS AMPLY LIKELY/LIABLE TO cross the threshold limit.

CA Jayesh Shah

CA Jayesh Shah (Professional)     04 February 2012

But here it is mentioned specifically in the query, that the likely amount is not going to exceed the threas hold limit,

As mentioned by Hari, if the payment is likely going to be exceed than only TDS should be deducted.

So as per me no interest is required to be paid.

CA PRAVEEN SINGH

CA PRAVEEN SINGH (MANAGER ACCOUNTS)     04 February 2012

Agree with all above...

ALWAYS KEEP IN MIND...

TDS IS DEDUCTED WHEN PAYMENT MADE OR PARTY A/C IS CREDITED WHICH IS EARLIER..

SO THAT TDS IS DEDUCTED OF ESTIMATED BASIS...

ABOVE CASE TDS IS TO BE DEDUCTED...

Raghunath Prasad

Raghunath Prasad (WORKING)     04 February 2012

i think law said that if we dont deduct tds the exp is not allowed but when we dedudct the tds and deposit same then exp is allowed for that F.Y. if we deduct the tds in nov and deposit the same then no intrest made if we deduct the tds in privious time and made the payment bill amount -tds then we paid intrest for it

 

Pls confirm me for that

CA Sherya

CA Sherya (Executive)     04 February 2012

TDS should be deducted on all the payments from current payment and there is no need to deposit Interest as the limit was not likely to be exceeded at the begining of the year..

Roshan A

Roshan A (Chartered Accountant)     04 February 2012

Agreed.RDS will be deducted on Rs. 95000 along with interest.


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Related Threads


Loading
Start a New Discussion

Popular Discussion


view more »







Subscribe to the latest topics :
Search Forum:

Trending Tags