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How to account for TDS under Accounting or Book-keeping ?

TDS (Tax Deducted at Source) accounting is a crucial component of financial management. It entails correctly documenting, calculating, and paying TDS in accordance with the guidelines of the Income Tax Act of 1961. The steps involved in accounting for TDS are as follows:

Record the Transaction: Entering the transaction into the books of accounts is the first stage in TDS accounting. This include keeping track of the invoice, payment voucher, and any additional pertinent paperwork. The transaction's gross amount as well as the TDS amount deducted should be included in the accounting entry.

Say, for illustration, that your business paid a vendor Rs. 10,000 for services provided. However, 10% TDS was subtracted, leaving the vendor with a net payment of Rs. 9,000. The accounting entry in this situation would be:

Debit: Rs. 10,000 for expenses (services).

Accounts Payable Credit: Rs. 9,000

TDS Payable Credit: Rs. 1,000

After the transaction has been logged, create a TDS payable account to keep track of the TDS sums that have been taken out but have not yet been paid to the government. The name of this account should be "TDS Payable," and it should be created under the heading "Current Liabilities."

The next step is to determine the TDS amount that must be paid to the government. The kind of the transaction and the relevant Income Tax Act requirements determine the TDS rate and threshold limit. Deduct the TDS amount from the total amount owed to the vendor after it has been determined, then credit the TDS Payable account.

Payment of TDS: The last step is to pay the government the TDS amount by the deadline. Both online and offline methods are available for paying TDS. Following the transaction, the bank account should be credited and the TDS Due account should be debited.

For instance, the accounting entry might be as follows if the due TDS amount is Rs.

TDS Payable - Debit of Rs. 1,000

Credit to Bank Account: Rs.1,000

A challan, or form including information about the payment such as the amount, the TDS rate, and the PANs of the deductor and the deductee, must be included with all TDS payments. The challan must be submitted to the income tax division by the deadline.

Maintaining accurate records and documentation relating to TDS, such as TDS certificates issued by the deductor, quarterly TDS statements filed with the income tax department, and annual TDS reports filed with the income tax department, is also crucial in addition to the aforementioned actions.

In conclusion, accounting for TDS is an important part of financial management, and comprehension of the procedure is crucial to ensuring adequate adherence to tax rules. TDS should be accurately calculated, recorded, and paid to help avoid fines, interest, and other consequences. To guarantee effective adherence to TDS regulations, it is advised to seek the advice of a tax expert or click at or you may write to us at

Few more points to ponder

To make sure that people and organisations are abiding by the nation's tax rules, TDS accounting is crucial. TDS is subtracted from certain transactions at the point of sale, and the money is deposited with the government within the permitted time range. Fines and interest charges may be incurred for noncompliance.

TDS accounting include entering the transaction in the books of accounts, setting up a TDS payable account, figuring out the necessary TDS payment, and promptly paying the government the necessary amount. Keeping proper records and paperwork, such as TDS certificates, quarterly TDS statements, and annual TDS reports, is also crucial.

Depending on the particulars of the transaction and the applicable Income Tax Act provisions, different TDS rates and threshold limits may apply. The TDS rate, for instance, is 10% for professional fees and 2% for rent payments over Rs. 2.4 lakhs per year. Selecting the proper TDS rate and threshold limit for each transaction is essential.

Companies and individuals can avoid exorbitant fines and interest expenses in the long run by correctly accounting for TDS. To ensure proper and timely compliance with TDS requirements, it is advised to use trustworthy online tools like Return Filer or to speak with tax experts.

In conclusion, both organisations and people are obligated to abide by the law, and TDS accounting is a crucial component of financial management. Businesses and individuals can guarantee that they fulfil their tax responsibilities and save any fines and interest costs by carefully completing the TDS accounting method.

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