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How to Record TDS of Commission?

Name :: N. C. KAWALE

Your Country :: India

Question Title: :: INCOME  TAX TDS

Explain your question in detail ::

If we treat income tax TDS as Current Asset, How to enter the TDS from Commission Record? Also How to treat our current year's Income Tax liability if I have not paid this liability any other way and I want to reduce the refund entitled by the liability from TDS.

Answer :: 

Thanks dear N.C. Kawale. I try to answer your questions one by one. Hope these answers will be helpful for you.

1. As per the Income Tax Law 1961 and its its section 194 H, if you have received commission from than Rs. 5000, the party who gave the commission will deduct 10% TDS from your our your total commission gained. It is your current asset because

a) It is just like advance income tax because liability will be in the assessment year instead of current year. Next year, it will your liability and so, we have to treat it as your current asset. So, following entry will pass.

For example ABC company has deducted your TDS when it had paid you commission. Following journal entry will pass.

ABC Company Account Dr. 90000

TDS   Dr. 10000

Commission Account Cr. 100000

b ) When you receive commission in cash

Cash Account Debit 90,000

ABC Company Account Credit 90,000

Remember ::  If it is deducted but your commission is less than Rs. 5000 or your total income less than taxable income slab, you can get refund whole your TDS or in assessment year, if your total income is less than taxable income, you have right to get refund your TDS.

2. Like any other expenses, you can treat income tax as the expense of business and In income statement, you can debit this expense.

3. There is different record, you can not deduct past refund from current TDS. In the assessment year, If there is no tax liability whole amount of TDS will refund. At that time, you can record.

Bank Account Debit 10,000

Income Tax Department Account Credit 10,000

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Accounting ! Answers: How to Record TDS of Commission?
How to Record TDS of Commission?
Accounting ! Answers
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