TDS on Exp. Provisions

1927 views

Save Share

Prince

34 Points Posted on 10 May 2007

Hello Bretren,

Please put your views on the following. Whether TDS is deductible where Provision for payment to contractor (not credited to any persons a/c) made on 31stMar.F.Y. end. If your answer is YES because of the following expln given u/s 194C,

"For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly"

                then please advice on whose name the  TDS details (that we are require to file quarterly) would go.And what if subsequently we found that no such provision was required , but by that time we had already deposited TDS in the Govt a/c.

   or  lets say that we had made a provision of Rs.10,000 on 31/3 but on 15/4 we got a bill of Rs.6,000. Going by the above expl.(if we take a view that TDS is required to be made on prov as well) we will have to deduct tax on Rs.10,000/ though actual invoice is of lessor amt.

Please put light on the issue.

Regards
Prince

Replies (2)

Gauravgupta

55 Points Posted on 10 May 2007

hi,

the matter is really very practical in nature....... Going by d income tax act it is necessary to make entry for tds when entry 4 prov. of exp.is made.......... what i have been suggesting others is as:

.....since the books of accounts r not closed on 31st march in practical ........i.e. the accounts r not finalised on 1st or 2nd april...... it takes some time to finalise the books ....... by then generally the bills can be recd.relating to the year just ended........ take the total of the bills recd. and make a back dated entry on 31st march of exactly the same amount as that of bills recd. (however it depends on how quickly the co. finalises the a/cs and whether the software of the entity allows making a back dated entry or not....... in my cases it does)............... however if the bills could not be recd. and amount can not be reasonably estimated do not make prov. entry for them to avoid problems

also pressure should b made on contractors to send bills as early as possible when it year end time

regards
Gaurav Gupta

Aashok Kumar Sharma

Finance/Compliance Consultant

77999 Points Posted on 06 November 2026

Practical position on year-end provisions:

• TDS sections (194C, 194J etc.) trigger on "credit of such sum to the account of the payee", and an Explanation treats credit to a "Suspense account or any other account, by whatever name called" as credit to the payee. A year-end provision for specific, identifiable payees (e.g. contractor bills known but not yet booked) attracts TDS on 31 March. Deposit by 30 April (Rule 30).

• Where the payee or the exact amount isn't identifiable (an estimated provision, reversed when actual bills come), many tribunals hold no TDS applies at provision stage, since there is no payee-wise credit. TDS is deducted when bills are booked next year.

• Disallowance: Sec 40(a)(ia) disallows 30% of the expense if TDS was deductible and not deducted or paid by the ITR due date. For identifiable provisions, deduct and deposit TDS on the provision by the due date to protect the deduction. If deducted on the provision, don't deduct again on booking the bill.

• CBDT Circular 3/2016 (no 40(a)(ia) disallowance where provision is reversed and TDS deducted on actual payment) addresses only certain cases. Document the reversal.