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author's profile photo Former Member
Former Member

TDS on Advance payment

TDS deducted on advance get reversed when we clear advance with invoive. but how the system should work in case there is a change in the rates of tds deducted between the two. For example, Advance made in march for Rs 10000, tds deducted @ 10 % 1000.

Now Invoice come in April for 30000/-, rated for TDS got changed (by budget) from either to 15% or 5%. We have made the approipriate tax codes and assigned them to the vendor master. But at the time of invoice processing TDS is deducted on whole 30000 @ either 15% or 5%.

Invoice 15 % 5%

TDS 4500 1500

F-54, Clearing of advance agt. Invoice, TDS will be reversed 1000 1000

Net TDS 3500 500

This is how system respond.

However, what should happen functionally is

Advance posting 1000 1000

Invoice [ 30000-10000] 20000 3000 1000

Total should be 4000 2000

I have checked JV, etc. but nothing is giving appropriate answer, Pl suggest on that.

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  • author's profile photo Former Member
    Former Member
    Posted on Mar 31, 2008 at 12:43 PM

    Hi

    It probably depends on when the service is rendered. Was it rendered last year or after the TDS rate change?. Depending on that, TDS should be calculated. However it is reasonable to assume that service is rendered upon submission of Invoice. In that case, what the system does is correct. ie using the new tax rate of 15% or 5%, as per your example

    Jayaram

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