Please Help: Interest on late payment of tds

Posted Date : 02-May-2012 , 11:17:43 am | Posted By sourabh mehra

When tds is not paid on time then we have to deposit tds alongwith interest.
According to me Interest On Tds is not allowed as deduction under income tax, and the co. can not charge interest from the deductees. and also the deducteed do not get the credit of this in 26AS.
Then what should be the accounting entry.

For example an employee having salary of Rs. 50000 and tds deducted is Rs. 5000 and Interest is Rs. 200
then what will be the accounting entry?

When tds is not paid on time then we have to deposit tds alongwith interest.
According to me Interest On Tds is not allowed as deduction under income tax, and the co. can not charge interest from the deductees. and also the deducteed do not get the credit of this in 26AS.
Then what should be the accounting entry.

For example an employee having salary of Rs. 50000 and tds deducted is Rs. 5000 and Interest is Rs. 200
then what will be the accounting entry?

Category : Income Tax | Answers : 1 | Comments : 3 | Hits : 12365

Answers

Answer By: Vikas Kundu

interest paid on TDS is allowed as deduction because TDS is not income for you. its just responsibility imposed on you and due to late payment of TDS, interest is compensatory expenses not a penalty in the eyes of law and no one denies for allowability of such interest as deduction.

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sandeep bansal

02-May-2012 , 12:24:26 pm

1)salary a/c dr 50000 to cash/bank 45000 to tds 5000 2)tds a/c dr 5000 interest/penalty dr 200 to cash/bank 5200 entry will be done by this method only .....only thing we have to remember that this interets of rs 200 /- is not allowed as deduction so at the time of computing taxable income we have to add this int in net profit