TDS on foreign payments

Question

Hi All
The scenario is given below:
1. Down payment of EUR 1000 done to a foreign vendor in Jan07 and TDS is deducted (say 22.44EUR inclusive of surcharge and ed cess.Amount in local curr-Rs 1122).Exchange rate on date of trans is-Rs50
                   Vendor ..........Dr         1000EUR    (Rs 50000)
                         To Tds Payable         22EUR    (Rs1100)
                         To Ecess Pay        0.44EUR    (Rs22)
                         To Bank             977.56EUR    (Rs48878)
2.J1INCHLN done for remittance challan on 05/02/07 when the exc rate is Rs 45 per Eur maintained in the exc rate table.Because of this entry passed is:
--TDS Payable ............Dr 1100
--TDS Ecess payable...Dr    22
            To TDS Clearing A/c 1010
            To exc rate gain A/c   112
3.Then bank challan updated and payment made to income tax authority for 1010.
4.Now invoice comes in the next month say20/02/2007 for EUR 2000 when the exc rate was Rs60
5       FB60 - Exp A/c ...............Dr 2000EUR    (Rs 120000)
                          To Vendor..........1955EUR     (Rs 117307)
                          To TDS Pay.........  44EUR     (Rs2640)
                          To ECess pay.....0.88EUR     (Rs53)
6  Down payment clearing done -F-54  on 20/02/2007
                   Vendor.......................Dr 977.56EUR    (Rs48878)
                   Tds Payable................Dr 22EUR          (Rs1100)
                   Ecess Pay.................Dr 0.44EUR        (Rs22)
                              To Vendor ...............1000EUR    (Rs 50000)
7 Now when we do J1INCHLN for this vendor.The foll entry is coming:
                                      Amt in Doc curr(INR)               Amt in local curr(INR)
--TDS Payable ............  Dr  1320                                         1540  (=2640-1100)
--TDS Ecess payable...  Dr     26.40                                         31  (=53-22)
            To TDS Clearing A/c.......... 1346.40                         1346.40
            To exc rate gain A/c..............   0                               224.60
There is a problem because of the exc rate conversion.
We have deposited what was there is TDS clearing acct(Total-Rs10101346.40 =Rs 2356.40) where as we have deducted(Rs 11222693-Rs1122=Rs 2693 as per point 1, 5 & 6).Even the TDS certficate shows amt of Rs2693 as paid and deducted.There is a discrepancy.
Kindly let me know the reason and what should be done to correct the same.
Points will be rewarded for help.
Thanks in Advance
Regards
Rakesh

Answer 1

Hi Rakesh,
The liability towards TDS is the amount you have deducted in INR.You have to  calcuate TDS based on INR_value and pay as such.
Here you have deducted Rs.2693 and have paid Rs.2356.40.The balance[ Excess deducted ] being 336.60[2693-2356.40] should be paid to the IT dept.
Pass the following entries and close the account as under::
1st entry: Dr::TDS clearing>336.60:::Cr:IT payable>336.60.[ The clearing acct.is now balanced]
The next entry  > Dr::IT payable>336.60:::Cr--->. Bank:336.60 [upon actual payment]
This resolves the problem in full.
Regards,
Ramesh.