<\/span>What is TDS (Tax Deducted at Source)?<\/span><\/h2>\n\n\n\nTax Deducted at Source (TDS) is a pre-tax deduction made at source (before payment) by the payer from the payment made to the payee. It is a mechanism of collecting tax by using a deduction mechanism rather than through payments made by the taxpayer. It is deducted at the time of payment, and directly deposited into the government (Income Tax Department’s) account.\u202f<\/p>\n\n\n\n
There are generally two types of TDS in Books of Accounts: TDS Payable and TDS Receivable. We will understand both these TDS entries in TallyPrime with examples.<\/p>\n\n\n\n
Suggested Read: How to Record Sales & Purchase Entry in Tally with GST<\/a><\/strong><\/p>\n\n\n\n<\/span>TDS Payable<\/span><\/h3>\n\n\n\nIt\u2019s the amount which you are required to deduct from the total payable amount to the service provider, contractor, professional, and then deposit to Income Tax department as tax on behalf of the payee.<\/p>\n\n\n\n
It\u2019s held on behalf of the Payee therefore it appears on the liability side of the balance sheet. Let’s see the TDS payable entry below:<\/p>\n\n\n\nDebit Account<\/strong><\/td>Credit Account<\/strong><\/td>Particulars<\/strong><\/td><\/tr>To Expense A\/c<\/td> \u2013<\/td> (Total Amount)<\/td><\/tr> \u2013<\/td> To Vendor\/Supplier A\/c<\/td> (Amount to be Paid)<\/td><\/tr> \u2013<\/td> To TDS Payable A\/c<\/td> (TDS Amount)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nThis must be confusing, let\u2019s try to understand through a practical TDS example<\/strong><\/p>\n\n\n\nConsider yourself as a hospital entity. Suppose you need to pay a sum of \u20b91,00,000 to a doctor who provides professional medical services at your hospital.<\/p>\n\n\n\n
Now as per the Finance Act, you should pay only \u20b990,000 to the doctor after deducting \u20b910,000 (at the rate of 10% on the total amount payable.) You need to deposit this 10,000 directly to the Income Tax department’s bank account on behalf of the doctor.<\/p>\n\n\n\n
Note:<\/strong><\/p>\n\n\n\n\n- The rate of 10% is for Professional services like medical and legal services under section 194J of the Income-tax Act. TDS deduction could be anywhere between 1% to 30% depending on the nature and number of payments to be made.<\/em><\/li>\n\n\n\n
- \u20b910,000 that is deducted would be considered as the amount paid by the doctor to the IT department. So, TDS is not your additional expense, but just a part of the payment that is diverted directly to the government, instead of the payee.<\/em><\/li>\n<\/ul>\n\n\n\n
<\/span>TDS Receivable<\/span><\/h3>\n\n\n\nTDS receivable is the amount deducted by your customer, client, tenant, etc. from the total payable amount and is deposited to the IT department on your behalf. Take a look at how TDS receivable would look in the book of accounts.<\/p>\n\n\n\nDebit Account<\/strong><\/td>Credit Account<\/strong><\/td>Particulars<\/strong><\/td><\/tr>Bank A\/c Dr<\/td> \u2013<\/td> (Total Amount)<\/td><\/tr> TDS Receivable A\/c<\/td> \u2013<\/td> (TDS Amount)<\/td><\/tr> \u2013<\/td> To Party A\/c<\/td> (Amount Paid)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<\/span>TDS Receivable Example<\/span><\/h3>\n\n\n\nIf you have rented out an office in your building to a bank at a rent of \u20b980,000 monthly, you will only receive \u20b972,000 in your bank account. \u20b98000 will be deducted by the bank and will be deposited as tax paid to the IT department on your behalf.<\/p>\n\n\n\n
Note:<\/strong><\/em><\/p>\n\n\n\n\n- Rent payable on land and building attracts 10% flat TDS rate.<\/em><\/li>\n\n\n\n
- The deducted amount is deposited to the Income Tax department on your behalf by the bank. It could be considered as the advanced tax paid by you.<\/em><\/li>\n<\/ul>\n\n\n\n
<\/span>TDS Payable<\/span><\/h3>\n\n\n\nIt\u2019s the amount which you are required to deduct from the total payable amount to the service provider, contractor, professional, and then deposit to Income Tax department as tax on behalf of the payee.<\/p>\n\n\n\n
It\u2019s held on behalf of the Payee therefore it appears on the liability side of the balance sheet. Let’s see the TDS payable entry below:<\/p>\n\n\n\nDebit Account<\/strong><\/td>Credit Account<\/strong><\/td>Particulars<\/strong><\/td><\/tr>To Expense A\/c<\/td> \u2013<\/td> (Total Amount)<\/td><\/tr> \u2013<\/td> To Vendor\/Supplier A\/c<\/td> (Amount to be Paid)<\/td><\/tr> \u2013<\/td> To TDS Payable A\/c<\/td> (TDS Amount)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nThis must be confusing, let\u2019s try to understand through a practical TDS example<\/strong><\/p>\n\n\n\nConsider yourself as a hospital entity. Suppose you need to pay a sum of \u20b91,00,000 to a doctor who provides professional medical services at your hospital.<\/p>\n\n\n\n
Now as per the Finance Act, you should pay only \u20b990,000 to the doctor after deducting \u20b910,000 (at the rate of 10% on the total amount payable.) You need to deposit this 10,000 directly to the Income Tax department’s bank account on behalf of the doctor.<\/p>\n\n\n\n
Note:<\/strong><\/p>\n\n\n\n\n- The rate of 10% is for Professional services like medical and legal services under section 194J of the Income-tax Act. TDS deduction could be anywhere between 1% to 30% depending on the nature and number of payments to be made.<\/em><\/li>\n\n\n\n
- \u20b910,000 that is deducted would be considered as the amount paid by the doctor to the IT department. So, TDS is not your additional expense, but just a part of the payment that is diverted directly to the government, instead of the payee.<\/em><\/li>\n<\/ul>\n\n\n\n
<\/span>TDS Receivable<\/span><\/h3>\n\n\n\nTDS receivable is the amount deducted by your customer, client, tenant, etc. from the total payable amount and is deposited to the IT department on your behalf. Take a look at how TDS receivable would look in the book of accounts.<\/p>\n\n\n\nDebit Account<\/strong><\/td>Credit Account<\/strong><\/td>Particulars<\/strong><\/td><\/tr>Bank A\/c Dr<\/td> \u2013<\/td> (Total Amount)<\/td><\/tr> TDS Receivable A\/c<\/td> \u2013<\/td> (TDS Amount)<\/td><\/tr> \u2013<\/td> To Party A\/c<\/td> (Amount Paid)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<\/span>TDS Receivable Example<\/span><\/h3>\n\n\n\nIf you have rented out an office in your building to a bank at a rent of \u20b980,000 monthly, you will only receive \u20b972,000 in your bank account. \u20b98000 will be deducted by the bank and will be deposited as tax paid to the IT department on your behalf.<\/p>\n\n\n\n
Note:<\/strong><\/em><\/p>\n\n\n\n\n- Rent payable on land and building attracts 10% flat TDS rate.<\/em><\/li>\n\n\n\n
- The deducted amount is deposited to the Income Tax department on your behalf by the bank. It could be considered as the advanced tax paid by you.<\/em><\/li>\n<\/ul>\n\n\n\n
Debit Account<\/strong><\/td>| Credit Account<\/strong><\/td> | Particulars<\/strong><\/td><\/tr> | To Expense A\/c<\/td> | \u2013<\/td> | (Total Amount)<\/td><\/tr> | \u2013<\/td> | To Vendor\/Supplier A\/c<\/td> | (Amount to be Paid)<\/td><\/tr> | \u2013<\/td> | To TDS Payable A\/c<\/td> | (TDS Amount)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n | This must be confusing, let\u2019s try to understand through a practical TDS example<\/strong><\/p>\n\n\n\n Consider yourself as a hospital entity. Suppose you need to pay a sum of \u20b91,00,000 to a doctor who provides professional medical services at your hospital.<\/p>\n\n\n\n Now as per the Finance Act, you should pay only \u20b990,000 to the doctor after deducting \u20b910,000 (at the rate of 10% on the total amount payable.) You need to deposit this 10,000 directly to the Income Tax department’s bank account on behalf of the doctor.<\/p>\n\n\n\n Note:<\/strong><\/p>\n\n\n\n TDS receivable is the amount deducted by your customer, client, tenant, etc. from the total payable amount and is deposited to the IT department on your behalf. Take a look at how TDS receivable would look in the book of accounts.<\/p>\n\n\n\n If you have rented out an office in your building to a bank at a rent of \u20b980,000 monthly, you will only receive \u20b972,000 in your bank account. \u20b98000 will be deducted by the bank and will be deposited as tax paid to the IT department on your behalf.<\/p>\n\n\n\n Note:<\/strong><\/em><\/p>\n\n\n\n |
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