TDS with Threshold

This topic explains the requirement of threshold amount in TDS and the process of calculating TDS for such transactions.

TDS calculation considering threshold limits

TDS Threshold defines the threshold limit for each TDS Section. TDS can be deducted only if the total transaction with the assessee exceeds the threshold limit in the financial year.

In a scenario where, credit or payment to a contractor under TDS Section 194C is below TDS threshold limit of INR 1,00,000 in aggregate in a financial year and single transaction threshold limit INR 30,000, TDS will not be deducted.

In the example given below, four transactions of INR 29,000 took place in a financial year, on the fourth transaction TDS will be deducted as the aggregate (previous transactions) credit or payment amount exceeds the TDS threshold limit of INR 1,00,000. TDS Calculation as following:

Particulars Amount Credited or Paid TDS Rates TDS Amount Threshold Limit
First Invoice 29000 2% Zero Less than Single Transaction Threshold Limit 30,000
Second Invoice 29000 2% Zero Less than Single Transaction Threshold Limit 30,000
Third Invoice 29000 2% Zero Less than Single Transaction Threshold Limit 30,000
Forth Invoice 20000 2% 2,140 (2% of 1,07,000 i.e. total of all invoices) Exceeds TDS Threshold Limit 1,00,000

  1. GL Entries for TDS where payment is less than threshold limits (first transaction where vendor has given the invoice for INR 29,000), will be as following:

    Particulars Amount
    Purchases Account 29000
    Vendor Account -29000

  2. GL Entries for TDS where payment is less than threshold limits (second transaction where vendor has given the invoice for INR 29,000), will be as following:

    Particulars Amount
    Purchases Account 29000
    Vendor Account -29000

  3. GL Entries for TDS where payment is less than threshold limits (third transaction where vendor has given the invoice for INR 29,000), will be as following:

    Particulars Amount
    Purchases Account 29000
    Vendor Account -29000

  4. GL Entries for TDS where payment is more than (exceeding) Threshold limits (forth transaction where vendor has given the invoice for INR 20,000), will be as following:

    Particulars Amount
    Purchases Account 29000
    TDS Payable Account 2140
    Vendor Account -29000

See Also

TDS Provisional Entry

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