Tds applicability

[Guest]

My query is related to TDS on the expenditure provision for year end. At the year end closing companies provided liability on estimate basis against some services but for which bill has not been received from the party. Say we make estimated provison for Rs 100. Now as per tax rules we have time upto 31 May to make the TDS payment(sayRs2). Now the party does not submit his bill upto 31st may and we make payment of Rs 2 to govt. Later on we realise that party will not make and it was a excess liabiltiy. Now we want to reverse this liabilty in next year. Now question is : Do i reverse Rs 98 or Rs 100. Can i clain Rs 2 as tax refund Do I have to issue TDS certificate to party. What is done in your comapny.

[Surender Gupta]

In your case, it is best option to issue TDS certificate to the party, if the party is agreed to pay you Rs. 2. Otherwise you do not have any option except to file refund claim.

AI Summary

TDS on year end provisions: issue certificate if supplier accepts withheld tax, otherwise pursue a refund claim. If a year end provision for services is reversed because no bill or supplier claim arises, the company may reverse the full provision in its books; if the supplier agrees to accept the withheld tax, the company should issue a TDS certificate and attribute the tax to the supplier, otherwise the company should file a refund claim with the tax authority for the TDS paid.