RECONCILATION OF INCOME AS PER PROFIT & LOSS A/C AND INCOME AS PER TDS CERTIFICATES WHOSE CREDIT CLAIMED IN THE SAME YEAR.

It must be noted that as per the provisions of section 199 of the Income Tax Act, 1961, the credit of TDS should be granted to the assessee only when corresponding income has been offered for taxation in the same corresponding assessment year in which the claim of the TDS is granted to the assessee. 

For the sake of reference, the relevant portion of section 199 of the Income Tax Act, 1961 is reproduced below:

“Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a  payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security or depositor or owner of property or of unit-holder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the Assessment Year for which such income is assessable.”

Every assessee before filing its annual return of income must consider the above mentioned provision of section 199 for claiming credit of TDS.   If the AO found while verifying the annual return of income that the income provided in the TDS certificates whose credit were claimed in the annual return exceeds the income offered for taxation , then the AO will disallow the credit of TDS by applying above mentioned provisions of section 199.

So, it is very necessary to reconcile the income offered for taxation ie as per Profit & loss a/c and income as per TDS certificates before filing annual return of income.

Methods of reconciliation

01. Bifurcate the income as per profit & loss a/c party wise, where TDS has been deducted

SN	Income	Party	Amount (Rs.)
1	Rent	A	XX
2	Rent	B	XX
3	Rent	C	XX
4	Interest	D	XX
5	Contract	E	XX
6	Contract	F	XX

02. Now, the each party amount should be tallied with the amount of gross amount paid or credited as provided in the TDS certificate issued by the same party. The same may not be matched for ‘n’ number of reason due to impact of Service tax, WCT, adjustment of advance paid, reimbursement of expenses etc. Hence, a reconciliation chart should be prepared showing the above adjustments

   

SN	Income	Party	Amount (Rs.)	Adjustment of Tax & reimbursement	Net amount ( iv+v)	Gross Amount as per TDS certificate
(i)	(ii)	(iii)	(iv)	(v)	(vi)	(vii)
1	Rent	A	XX
2	Rent	B	XX
3	Rent	C	XX
4	Interest	D	XX
5	Contract	E	XX
6	Contract	F	XX

03.  There may be cases, where the assessee                                                                                                                                                                & nbsp;                                                                                                                                                                                                                                                              & nbsp;  has received the advance after deduction of TDS during the year and the same is not offer for taxation in the year in which the TDS deducted. This leads to carried forward of TDS and the same is to be claimed in the year in which income has been offered for taxation.

SN	Income	Party	Amount (Rs.)	Adjustment of Tax, reimbursement & advances	Net amount ( iv+v)	Gross Amount as per TDS certificate
(i)	(ii)	(iii)	(iv)	(v)	(vi)	(vii)
1	Rent	A	XX
2	Rent	B	XX
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