I would like to know about TDS deductible on provision for expenses. Suppose at the end of the year, many provisions are made, say as on 31/03/09 for various payments like payments to contractors, auditors, where in normal course, TDS is applicable. In this provision case, I am simply making a provision & not crediting to a specific party. I am passing a simple entry like audit fees, labour charges etc DR to Provision for Expenses.
All the provisions made as on 31/03/09 would be reversed as on 01/04/09 & all actual expenses as per actual bills are booked on the bill date. I will deduct the TDS applicable on these payments on the basis of booking.
Vijayanand , Mumbai
As per the law regarding tax at source, a payer is liable to deduct the tax , moment of either actual payment or crediting the sum to payee.
When you make provision, it is actually neither credit to any one’s account nor it is actual payment. Therefore, law of tax at source is not applicable. The only point one must check is whether the provisioning is not bypassing the accounting norm ne must follow.
About taxworry
Dear Sir,
We have read your point of “Is TDS Required If Only Provisions For Expense Made?” but you have not mentioned the section of Income Tax Act under which these provisions can be made.
Your reply will be highly obliged.
Regards
provisions are made under general accounting policy as regulated by accounting standard. There is no provision under I t Act which allows provisions or accounting methods