We are selling our products to our customer on F.O.R destination basis. The freight have to be paid by the buyer. But we will issue credit note to the buyer to the extent of amount paid towards freight by the byer. As the buyer is paying the freight, we have not deducted any TDS for the FY 08-09 and 09-10. Whereas our internal auditor says that the Freight will be disallowed for the reason of " non deduction of TDS' . Is it correct?
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TDS on freight - paid by the buyer
Replies (3)
YES YOUR INTERNAL AUDITOR IS CORRECT. FREIGHT PAID BY THE BUYER BUT ULTIMATELY REIMBURSED TO BUYER BY YOU. SO IT IS TO BE TREATED AS FREIGHT PAID BY YOU. BUYER IS ONLY ACTING AS INTERMEDIARY TO PAY FREIGHT TO TRANSPORTER AND LATER ON CLAIMED REIIMBURSEMENT FROM YOU.
THUS AT THE TIME OF REIMBURSEMENT OF FREIGHT THROUGH CN, U HAVE TO TREATED IT AS FREIGHT PAYMENT AND REQUIRED TO DEDUCT THE TDS. IF THE TDS DEDUCTIBLE BUT NOT DEDUCTED, THEN THE EXPENSES AGAINST WHICH TDS IS TO BE DEDUCTIBLE SHALL BE DISALLOWED UNDER SECTION 40(a)(ia)
REGARDS,
MANOJ
Yes your Internal auditor is right.
as TDS to be at the time of payment or credit whichever is earlier, the buyer should deduct tax at sourse at the time of paying freight to transporter.
however, as actual payer is your company, TDS should be deposited by you.
For this, u should give credit to your buyer for the net amount paid by him to the transporter. And the amount of TDS should be paid by your company..
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