Latest News -
Home » DIRECT TAX » Accounting entries relating to Tax deducted at source

Accounting entries relating to Tax deducted at source

Today we are going to discuss a simple & basic concept relating to accounting entries of Tax deducted at source on expenses & income. Most of people other than people from accounting background doesn’t know much about this. They always have some confusion about this.

We are already discussed in our earlier post relating to TDS deduction limit, TDS rate list & who is liable to deduct TDS etc.

Accounting entries relating to Tax deducted at source on payment of Expenses

In this  we are discussing accounting entries relating to payment of expenses & deduction TDS on it.

example of TDS Entry:-

Suppose we are going to make a payment of interest of Rs. 50000/- to Mr. Ankit & we are liable to deduct TDS on it. In this TDS which is deducted by us is liability of ours. Therefore we have credited TDS Payable A/c. & Interest is our expenses that’s why we have debited the same. At present we have not make the payment of same that’s why we have credited to Party’s account.

Following entry is passed:

Interest Expenses A/c.   Dr.       50000

To   Ankit    A/c.                                45000

To  TDS Payable  A/c.                       5000

Following below entry is passed when we are making the payment of TDS collected to the government account. By passing the below entry TDS payable account becomes NIL.

TDS Payable A/c.    Dr.                5000

To Bank   A/c.                                    5000

When we are making the payment to Party then the following entry is passed. After passing the below entry the account of Party become NIL.

Ankit    A/c.    Dr.                           45000

To  Bank  A/c.                                  45000

 Accounting entries relating to Tax deducted at source on receipt of Income

In second Part of this post we are discussing accounting entries relating to receipt of income & deduction TDS on it by the other party.

We are going to understand the entries with the help of example:

Suppose we are going to receive an interest of Rs. 100000/- from Mr. Akshay&Mr. Akshay had deducted the TDS on it.  In this TDS which is deducted by Mr. Akshay isassets of ours. Therefore we have debited TDS receivable A/c. & Interest is our income that’s why we have credited the same. At present we have not received the income that’s why we have debited the Party’s account.

Following entry is passed:

Akshay   A/c.  Dr.                        90000

TDS Receivable A/c.                   10000

To Interest Income A/c.                100000

When we are receiving the interest income then following below mentioned entry is passed. After passing the entry the Party account become NIL.

Bank  A/c.  Dr.                             90000

To Akshay   A/c.                            90000

 

TDS receivable will be shown on the Assets side of the balance sheet.

You can also view the frequently asked question on TDS for more clarity on the TDS.

About TAX BANIYA

I am passionate about my work , What ever it be . Life has its own way to express , stay positive and keep going . Life doesn't go the way you want, " Learn to adapt and modify". My mantra to be happy in life " Life has always been uncertain why worry ...forget the past , live your present focus it

2 comments

  1. Hi!!!
    I have not deducted TCS (Motor vehicle) on advance amount received in Aug 16..Is it ok if i will deduct in next month.

  2. Nice post but one thing if we are going to make a payment against bill where service tax are included. For example,
    Fees for professional charges Rs. 10000
    Service tax (10%) Rs. 1000
    Total bill amount is Rs 11000
    On which amount we have to deduct TDS. On the amount including TDS Rs. 11000 or on the amount excluding TDS I.e Rs. 10000.

Leave a Reply

Your email address will not be published. Required fields are marked *

*