TDS accounting entries for payer and receiver

Set up ledgers (Alt+L)

Payer side: bill of ₹1,00,000 + 18% GST from a contractor (company, 2%)

Booking the bill (F9 or F7)

Contract Charges A/c           Dr  1,00,000
Input CGST A/c                 Dr      9,000
Input SGST A/c                 Dr      9,000
    To ABC Pvt Ltd A/c                          1,16,000
    To TDS Payable – Contract A/c                   2,000

TDS is on ₹1,00,000, the amount before GST.

Paying the contractor (F5)

ABC Pvt Ltd A/c                Dr  1,16,000
    To Bank A/c                                 1,16,000

Depositing TDS by the 7th (F5)

TDS Payable – Contract A/c     Dr      2,000
    To Bank A/c                                     2,000

Receiver side: your customer pays ₹1,16,000 minus ₹2,000 TDS

Receipt (F6)

Bank A/c                       Dr  1,14,000
TDS Receivable A/c             Dr      2,000
    To Customer A/c                             1,16,000

Year-end for the receiver

TDS Receivable is adjusted against the income tax you owe. Any extra becomes a refund due.

Provision for Income Tax A/c   Dr
    To TDS Receivable A/c