TDS on Provisional Entries

As per TDS rules, tax (TDS) has to be deducted at source, when amount is paid or credited to the account of the payee whichever is earlier. When the amount is credited to suspense account or any provisional account, then it is treated as amount is credited to the account of the payee and tax has to be deducted at source. Hence, Tax has to be deducted at source even on provisions made in the books of accounts to which TDS provisions are applicable.

A provisional entry should be posted before posting an actual entry, on posting of actual entry, provisional entry will be reversed. As per requirement, TDS to be calculated on provisional entry and on posting of actual entry, system should not calculate TDS as it is deducted in provisional entry.

For example, provisional expense journal has to be created and posted for INR 10000 against professional expense and 10% TDS to be calculated on the expense amount.

1. Choose the icon, enter Purchase Journal, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Posting Date	Specify the date of entry.
   Document Type	Select Invoice as document type.
   Document No.	Specify the document number.
   Party Type	Select Vendor as party type.
   Party Code	Select relevant vendor code.
   Account Type	Select G/L Account.
   Account No	Select relevant account number for provision entry.
   Amount	Amount should be negative.
   TDS Section	Select relevant TDS Section.
   Bal. Account Type	Select G/L Account as balance account type.
   Bal. Account No.	Select the relevant expanse account.
   Provisional Entry	Mark true.

   In this case TDS calculation will be as following:

   Component	Value
   TDS Base Amount	10000
   TDS Amount	1000 (10000*1%)

   GL Entries for Provisional Entry, will be as following:

   Particulars	Amount
   Expense Account	10000
   Provisional Account	-10000
   TDS Payable Account	-1000
   Vendor Account	1000

• Later invoice created against the provisional entry.

1. Choose the icon, enter Purchase Journal, and then choose the related link.

2. Fill in the fields as described in the following table.

   Field	Description
   Posting Date	Specify the date of entry.
   Document Type	Select Invoice as document type.
   Document No.	Specify the document number.
   Party Type	Select Vendor as party type.
   Party Code	Select relevant vendor code.
   Account Type	Select Vendor.
   Account No	Select relevant vendor code.
   Amount	Amount should be negative.
   Bal. Account Type	Select G/L Account as balance account type.
   Bal. Account No.	Select the relevant expanse account.

3. Select Apply Provisional Entry and select the relevant provision entry posted for the vendor.

   GL Entries for purchase invoice against provisional entry, will be as following:

   Particulars	Amount
   Vendor Account	-10000
   Provisional Account	10000

4. On posting of provisional entry Provisional Entries will be created, and once the invoice is applied with the entry Applied Invoice No. field will be updated with the invoice number.

• If this is found that the provisional entry needs to be reversed, then option of Reverse Transaction and Reverse Without TDS are available in Provisional Entries.

1. Reverse Transaction will reverse all the posted entries of the selected transaction.
2. Reverse Without TDS will reverse all the posted entries of the selected transaction other than the TDS entry.
3. System will mark the reverse transaction as Reversed After TDS Paid if TDS is paid to the government for the selected transaction.

See Also

TDS Adjustment Entry

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