Availability of TDS credit

[madhavvan n]

x co is a contractor undertaking contract jobs. For FY 08-09 it has received a sum of Rs. 5 crores and TDS deducted is Rs. 10.20 lacs can it accrue income of Rs. 4 crores since only Rs. 4 crores work is completed. In this case will the TDS credit of Rs. 10.20 lacs be available, or it has to accrue the entire Rs. 5 crores as income to claim the TDS of Rs. 10.20 lacs. ( this will be contrary to accounting standards as only work completed can be accrued as income)

[Rama Krishana]

The suggested procedure is to recognise income of Rs. 4 crores only as it has accrued actually per accounting standards and claim the benefit of TDS proportionately. The proportionate claim of TDS can be made in the next year when the remaining amount of Rs. 1 crores would be recognized in the books of account. Now the format of return also permits this. You have to mention the amount of credit claimed out of TDS deducted.

AI Summary

TDS credit entitlement follows recognised income; claim proportionate TDS only to the extent income is accrued in the year.
Recognition of contractor income should follow accounting accruals, and TDS credit entitlement aligns with the amount of income actually recognised; the taxpayer may claim TDS credit proportionately for the amount recognised in the year and claim the remaining credit when the balance income is recorded in a subsequent year, with tax return formats permitting declaration of the amount of TDS credit claimed.