TDS on Advance for Fixed asset

Sriguru

Hi all,

We have paid various advances for installation of a software.While paying we have deducted TDS against every advance and the advance account is debited for the entire amount every time we make payment .
The vendor is paid in net of TDS.

Now we need to capitalise the software.So whatever the amount in the advance account is transferred to FA a/c.

My question is for purchase of fixed asset, TDS should not be deducted.
We have deducted the TDS and remitted. Hence no outflow of cash. So we have shortly paid for the asset and we have capitalised for more amount.

What is the logic behind this?
Should we need not deduct TDS for advance payable for acquisition of software?

Pls clarify.

anusraw · 03:42 PM

hi,

first of all there would bw no tds on purchase of asset. if you have collected and remitted it to the software company then you can capitalise the asset at the total amount(including deduction).

Quote:

Originally Posted by Sriguru

Hi all,

We have paid various advances for installation of a software.While paying we have deducted TDS against every advance and the advance account is debited for the entire amount every time we make payment .
The vendor is paid in net of TDS.

Now we need to capitalise the software.So whatever the amount in the advance account is transferred to FA a/c.

My question is for purchase of fixed asset, TDS should not be deducted.
We have deducted the TDS and remitted. Hence no outflow of cash. So we have shortly paid for the asset and we have capitalised for more amount.

What is the logic behind this?
Should we need not deduct TDS for advance payable for acquisition of software?

Pls clarify.

only service charges paid by u for installation of assets would be liable to TDS if they exceed Rs.50000

Sriguru

Thanks anu,

But we have deducted TDS and remitted to govt for which we have issued TDS Crtfcte only.

My question is the TDS part need not to be capitalised?

Regards
Sriguru

anusraw

no u could not capitalize that, u have to set off ur tds liability with this payment, because if u capitalize that u wuld be not benefitted from that. because depreciation on tds part (capitalized ) will not set off during life time.
so amt wuld not capitalize

wils24

you can't capitalise it for the pupose of Income Tax Act

sachinahuja

Hi,

TDS is deducted and deposited on behalf of vendor. The amount has to be deducted and paid to the government instead of vendor as per Income Tax Act.

Let us take a example of transaction where TDS is not applicable then the full amount would be capitalised.

Hence this is the same case here the amount is paid to the government instead. we have made the full payment for asset purchased. The cash ouflow goes to government isntead of vendor.

hope it will clarify your query.

Best Regards,

Sachin Ahuja

anujpathania

Dear Sir,

When we purchase something from any vendor and also getting installation services from them then, We are taking two things from from
1. Material (Software which is Purchase - No TDS on this)
2. Services (Installation Charges - TDS should be deducted from this part of amount as it is a Contract for Services not a Purchase.

Now as per Your Query, You will Capitalise the amount of TDS deducted on the amount of services, But Sorry Dear Not on the Cost of Software.

Cu
Anuj Pathania
9015877263

aabhi_mane

Quote:

Originally Posted by anujpathania

Dear Sir,

When we purchase something from any vendor and also getting installation services from them then, We are taking two things from from
1. Material (Software which is Purchase - No TDS on this)
2. Services (Installation Charges - TDS should be deducted from this part of amount as it is a Contract for Services not a Purchase.

Now as per Your Query, You will Capitalise the amount of TDS deducted on the amount of services, But Sorry Dear Not on the Cost of Software.

Cu
Anuj Pathania
9015877263

I am agreed with Mr. Sachin Ahuja. There is no question of reduction in capitalisation of software as you debit the tds to vendor not to asset. So why the question of deduction in services arises? You will debit tds to vendor and pay to govt. as simple as normal.
Abhijit