TDS on Advance payment

Question

TDS deducted on advance get reversed when we clear advance with invoive. but how the system should work in case there is a change in the rates of tds deducted between the two. For example, Advance made in march for Rs 10000, tds deducted @ 10 % 1000.
Now Invoice come in April for 30000/-, rated for TDS got changed (by budget) from either to 15% or 5%. We have made the approipriate tax codes and assigned them to the vendor master. But at the time of invoice processing TDS  is deducted on whole 30000 @ either 15% or 5%.
Invoice                    15 %                 5%
TDS                     4500                   1500
F-54, Clearing of advance agt. Invoice, TDS will be reversed           1000                                         1000
Net TDS             3500                                         500
This is how system respond.
However, what should happen functionally is
Advance posting                                                                        1000                                         1000
Invoice  [ 30000-10000] 20000                                                     3000                                         1000
Total should be                                                                          4000                                         2000
I have checked JV, etc. but nothing is giving appropriate answer, Pl suggest on that.

Answer 1

Hi
It probably depends on when the service is rendered. Was it rendered last year or after the TDS rate change?. Depending on that, TDS should be calculated. However it is reasonable to assume that service is rendered upon submission of Invoice. In that case, what the system does is correct. ie using the new tax rate of 15% or 5%, as per your example
Jayaram