Netting Off of Amount Receivable & Payable for TDS

[Vidhi Agroyee]

Company 'A' receives certain Services from Company 'B' , that is incorporated outside India . Also Company 'A' is also rendering certain different type of Services to Company 'B'. While Withholding the TDS , whether the Company 'A' in its Books should net off the amount payable and net receivable and then deposit the TDS OR the TDS needs to be deposited on amount payable by Company 'A' to Company 'B' , without netting off.

What are the Income Tax Provisions in this regard.

[CAGOPALJI AGRAWAL]

If company A is rendering services to Company B then it is suppose to get the payment from B and such receivable is not subject to withholding tax.

Of course the company A is liable to withhold the tax, if applicable on the services received from company B.

It is nothing to do with tax.

Amount receivable and payable can or cannot be set off, would have to be looked form FEMA point of view. Per Accounting principles, it might be stated net.

AI Summary

Withholding tax: netting does not avoid TDS; tax must be deducted on payments for services received. Withholding tax applies to payments made for services received; receivables for services rendered are not subject to deduction by the renderer. Netting payable and receivable is an accounting/FEMA matter and does not by itself discharge the payer's obligation to deduct and deposit tax on payments for services received.