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Whether TDS to be treated as expenditure?

JAYARAM (DIRECTOR) (48 Points)

05 October 2018

during the AGM of a resident's association,(Registered under Society Act) the income & expenditure account submitted had TDS accrued on bank FD Interest, mentioned under income. A member took objection to it arguing that it is an expenditure as it is outgoing & should have been under expenditure account. Is he right in his argument or procedure followed by the Association is correct. please clarify.

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14 Replies

RAJA P M ("Do the Right Thing...!!!") (127072 Points)
Replied 05 October 2018

Are You claim the TDS...?

aradhana upadhyay (151 Points)
Replied 05 October 2018

TDS deducted is neither an income nor an expenditure. It is an asset and shown as TDS receivable under current assets heading.

Rakesh Joshi (CA Final) (1272 Points)
Replied 05 October 2018

From your question It can be said that the Bank FD is an Investment for you. Since FD is an Investment, the interest paid by the bank on such investment is an income for you. The TDS deducted by the bank on such interest is credited to your PAN and will be reflected in your 26AS as TDS credit. From the above discussion it can be concluded that TDS on interest income earned by you can never be treated as an expenditure.

JAYARAM (DIRECTOR) (48 Points)
Replied 05 October 2018

Thanks for explanation. As I am a committee member, a more elaborate explanation in lay man's language is very much appreciated. If relevant IT Sec. and or any decided apeal proceedings available in this regard would help us a lot to put the members argument to rest.

aradhana upadhyay (151 Points)
Replied 05 October 2018

I don't think there is a specific section for that. But please do let me know if I'm wrong. It is the way of presentation. TDS should be added to the interest income and shown in Income side, and TDS receivable should be treated as an asset. But it can never be treated as an expense since either you will get this amount as refund, in case the tax is lesser than the TDS, or it will reduce the net tax liability. Both ways it is actually like an income and not an expense.

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Rakesh Joshi (CA Final) (1272 Points)
Replied 05 October 2018

Agree with the view

JAYARAM (DIRECTOR) (48 Points)
Replied 05 October 2018

In continuation of my above topic, How will the TDS amount viewed in an entity which is not registered under IT Act or not assessed to tax, and does not claim refund or adjustment against tax liability. Will the treatment reamains same as explained by honourable members of the forum or is it different ?

Rakesh Joshi (CA Final) (1272 Points)
Replied 05 October 2018

If a person is not registered under IT act it means that he does not have PAN.

In case no PAN is obtained bg a person then TDS cannot be done since TDS is made against a particular PAN.

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JAYARAM (DIRECTOR) (48 Points)
Replied 06 October 2018

The resident's association has obtained pan card & the bank has been deducting TDS on FD. Only thing is that since not assessed to tax, refund is not being claimed. The main reason being association runs a free primary school for under previlaged children with free books & uniforms. The main stay of the association is from a Ganesh temple built & run by it in its premises. Due to its charitable activities , the association does not have taxable income. Please let me how the issue is viewed in this scenario.

Rakesh Joshi (CA Final) (1272 Points)
Replied 06 October 2018

Please clearly tell what is the issue.

If you are asking about the refund then the refund can be claimed is by filing ITR of the trust. When there is TDS done and the income is below taxable limit you can file ITR to calim refund.

Revert if you are not clarified with the answer.

aradhana upadhyay (151 Points)
Replied 06 October 2018

If you are filing income tax returns, you may go by the method mentioned before. If you are not filing returns, then I don't think you should worry about TDS part, anyhow you will not get the benefit. Just show the net interest amount received, after deducting TDS, for the FD.

Suman Sarkar (Accountant) (124 Points)
Replied 06 October 2018

TDS itself is a solution of your question, it is a tax, not an expense or income. It will come under tax paid by you to the government. If u do not claim it then still it would be the Tax deducted by the government. There is a huge difference between Tax paid and expenses. Expenses are made against your activities of business while Tax is a different part its come under all duties & Taxes in the balance sheet. Though it looks like an expense as you are paying it to the government but it is not an expense. if bank deducted TDS then it is a current asset and if you do not file the IT then it will not be carry forwarded, it is your fault that you are not claiming the refund of your tax.

Ashok Kumar Tekuru (Tax Professional (DT & GST)) (324 Points)
Replied 06 October 2018

TDS is nothing but a Advance Tax, hence it is Current Asset, after filing return, you may deduct that amount from your tax liability and balance need to pay, other wise you will get refund of the same after filing return.

nagaraj kadlaskar (79 Points)
Replied 06 October 2018

Though it is running charitable activities, as it is registered as a charitable entity, application should be filed in the Income tax department and obtain 12A certificate. It is a pre requirement to file income tax return. Only on obtaining the certificate it will be recognized as non profit charitable institution and TDS refund may be claimed by filing return. Hope this will enable you to improve on with the free education purpose.