Accounting entries for TDS deducted on expenses under section 194C
As we are aware that the payer in some cases, is required to deduct TDS on various expenditures incurred by him in respect of his business or profession. Let’s discuss accounting entries when TDS is/ has been deducted on expenditures/ payments covered under section 194C:
Accounting Entries in case of payment to contractors where TDS is deductible under section 194C at the rate of 1% (individual/ HUF) or 2% (Other cases)
Suppose, Ram receives job work services from Shyam on 10-02-2023 for Rs. 2 Lakhs. Payment is made to Shyam on 03-03-2023 after deduction of TDS @ 1%. Accounting entries are as follows:
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10-02-2023: At the time of providing expenses- |
Job Work Expenses A/c Dr 2,00,000 To Shyam A/c 1,98,000 To TDS payable on contractor 2,000
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03-03-2023: At the time of payment |
Shyam A/c Dr 1,98,000 To Bank A/c 1,98,000
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07-03-2023: When TDS is deposited to Government |
TDS Payable on contractor A/c Dr 2,000 To Bank A/c 2,000 |
Suppose, Ram receives job work services from Shyam & Company (partnership firm) Rs. 20,000 on 10-02-2023 and makes payment on 03-03-2023.
In this case, TDS is not deductible as under section 194C TDS is deductible where transaction amount is above Rs. 30,000 or aggregate amount of all such transactions with the payee exceeds Rs. 1 Lakh.
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10-02-2023: At the time of providing expenses- |
Job Work Expenses A/c Dr 30,000 To Shyam & Co. A/c 30,000
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03-03-2023: At the time of payment |
Shyam & Co. A/c Dr 30,000 To Bank A/c 30,000
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Suppose, in the above example, job work services received from Shyam & Co. is Rs. 50,000. In such case, TDS shall be deductible @ 2% as the status of payee (Shyam & Co.) is other than individual or HUF.
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10-02-2023: At the time of providing expenses- |
Job Work Expenses A/c Dr 50,000 To Shyam & Co. A/c 49,000 To TDS payable on contractor 1,000
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03-03-2023: At the time of payment |
Shyam & Co. A/c Dr 49,000 To Bank A/c 49,000
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07-03-2023: At the time of deposit of TDS to Government |
TDS payable on contractor A/c Dr 1,000 To Bank A/c 1,000 |
Note: If PAN of the payee is not available, TDS shall be deducted at the rate of 20% instead of 1% or 2%.
