Tuesday, June 9, 2020

Journal Entry for TDS - With Relevant Examples

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Journal Entry of TDS
Journal Entry of TDS

Tax Deduct at Source

We will understand in this article about various journal entries of TDS along with many relevant examples. But before an understanding of the Journal Entry of TDS, we have to understand that what is meant by tax deducted at source.

Tax deducted at source is considered as a Direct Tax. This tax is collected by the Center. Generally, Income Tax is the responsibility of the person who is having Income. But In some cases, a fixed percentage has to deduct by the person who made payment to another person. For Example, Mr. Ram has taken a building on rent from Mr. Shyam then In this case Mr. Ram will deduct TDS during making a payment towards rent to Mr. Shyam under Section 194I.

tds u/c 194,194A,194C,194I,194J
tds u/s 192,194c,194i,194j

There are various sections introduced by the central government to deduct TDS follows:

Sr. No. Section Rate Remarks
1 192 Slab Rate Salary
2 192A 10% Accumulated Balance of Provident fund
3 193 10% TDS on Interest on securities
4 194A 10% TDS on Interest (Other than Interest on Securities)
5 194B 30% Winnings from lotteries, crossword, puzzles. card games etc.
6 194C 1% / 2 % TDS on contract
7 194I

Plant and Machinery - 2%

Land and Building - 10%

TDS on Rent
8 194J

10%

TDS on professional Services

Format of Journal Entry of TDS

Suppose we are making payment of Rent to Mr. Shyam amounting to Rs.50000 and TDS rate is 10%

Payment made to Shyam after deducting TDS

Date Journal Entry Dr./Cr. Amount(In Rs.)
XX/XX/XXXX Shyam A/c Dr. 50000
 To Bank A/c Cr. 45000
 To TDS Payable A/c Cr. 5000
(Being Payment made to Shyam after deduction of TDS)

Payment made to Government towards TDS 

Date Journal Entry Dr./Cr. Amount(In Rs.)
XX/XX/XXXX TDS Payable A/c Dr. 5000
 To Bank A/c Cr. 5000
(Being TDS paid to Government)

Where is TDS shown in Balance Sheet and P& L

At the year-end, if TDS is not paid till 31st March then have to show in Balance Sheet under Current Liability.

Examples of TDS Journal Entry

Example1: Journal Entry for TDS u/s 192

Mr. Saini working with ABC Co., who is making payment of Rs. 50000(Tds deducted 3000 u/s 192) for the month of March to him as salary on 7th of the following month. Write a journal entry in the books of ABC Co. during making payment to Mr. Saini.  

Solution:

Journal Entry for the recording of salary on an accrual basis and TDS separately recorded

Date Journal Entry Dr./Cr. Amount
31/03/2020 Salary A/c Dr 50000
 To Outstanding Salary A/c Cr. 45000
 To TDS Payable A/c Cr 5000
(Being Salary recorded on an accrual basis)

Journal Entry for making payment of salary after deduction of TDS

Date Journal Entry Dr./Cr. Amount
07/04/2020 Outstanding Salary A/c Dr. 45000
 To Bank A/c Cr. 45000
(Being Salary Paid to Mr. Saini)

Journal Entry for payment of TDS to government 

Date Journal Entry Dr./Cr. Amount
07/04/2020 TDS Payable A/c Dr. 5000
 To Bank A/c Cr. 5000
(Being TDS paid to Government u/s 192)

Example2: 

Suppose we have given a contract to Mr. Manorma for small construction to an individual for which they quoted price was Rs.110000. Now they completed the contract and we have to make payment to them after the deduction of TDS u/s194C.

Solution:

Journal Entry for recorded contract on an accrual basis

Date Journal Entry Dr./Cr. Amount
31/03/2020 Contract A/c Dr 110000
 To Manorma A/c Cr. 108900
 To TDS Payable A/c Cr 1100
(Being contract recorded on an accrual basis)

Journal Entry for making payment to Debtor Mr. Manorma

Date Journal Entry Dr./Cr. Amount
07/04/2020 Manorma A/c Dr. 108900
 To Bank A/c Cr. 108900
(Being amount of Rs.108900 Paid to Mr. Manorma towards contract)     

Journal Entry for making payment to Government towards TDS deducted of Mr. Manorma

Date Journal Entry Dr./Cr. Amount
07/04/2020 TDS Payable A/c Dr. 1100
 To Bank A/c Cr. 1100
(Being TDS paid to Government u/s 194C)
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Written by: Pankaj Kumar


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