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Carry Forward of TDS and matching with Income under Cash Basis of Accounting

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ABCAUS Excel for Chartered Accountants

Excel for
Chartered Accountants

One of the biggest problems faced by professionals following cash basis of accounting was Tax Deducted at Source by the clients following mercantile or accrual basis of accounting against unpaid bills at the close of the financial year.

Under the accrual basis, the clients would deduct and pay the TDS against the Assessment Year relevant to the financial year. However, under cash basis, the professional firm would recognise unpaid bills as income only whenthey are realized.

For example:
Professional firm (ABC and Co.) raises bills of 1 lacs on the client (XYZ) Ltd as on 15 th February 2013. As on 31 st March, 2013, the client makes a provision for TDS Rs. 10000/- and includes it in its TDS return of quarter 4 of FY2012-13 (AY 2013-14). The client pays the bill in FY 2013-14.

This often creates confusion among professionals as to which assessment year they should claim TDS credit? and how?

Rule 37BA of Income Tax Rules which was inserted w.e.f. 01-11-2009 provides for apportionment of TDS in such situations. As per rule 37BA tds credit should match with the income assessable.

Sub Rule (3) of Rule 37BA is reproduced as under:

(3) (i) Credit for tax deducted at source and paid to the CentralGovernment, shall be given for the assessment year for which such income isassessable.
(ii) Where tax has been deducted at sourceand paid to the Central Government and the income is assessable over a numberof years, credit for tax deducted at source shall be allowed across those yearsin the same proportion in which the income is assessable to tax.

Following rule 37BA(3) as above, the professional firm should file its income tax return and claim TDS as under:



 

 

 

 

 

 


 

FY:2012-13, AY 2013-14

In TDS Schedule ITR-4, leave column 5 blank, incolumn 6 write 10000/- and in column 7 write 0.00.

FY:2013-14, AY 2014-15

In TDS Schedule ITR-4, in column 5 write 2013.In column 6 write 10000/- and in column 7 write 10000/-

What is Cash Basis of Accounting? ...common mis-beliefs and associated myth... Read more >>

TDS Credit Rule 37BA
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