TDS with Threshold
This topic explains the requirement of threshold amount in TDS and the process of calculating TDS for such transactions.
TDS calculation considering threshold limits
TDS Threshold defines the threshold limit for each TDS Section. TDS can be deducted only if the total transaction with the assessee exceeds the threshold limit in the financial year.
In a scenario where, credit or payment to a contractor under TDS Section 194C is below TDS threshold limit of INR 1,00,000 in aggregate in a financial year and single transaction threshold limit INR 30,000, TDS will not be deducted.
In the example given below, four transactions of INR 29,000 took place in a financial year, on the fourth transaction TDS will be deducted as the aggregate (previous transactions) credit or payment amount exceeds the TDS threshold limit of INR 1,00,000. TDS Calculation as following:
| Particulars | Amount Credited or Paid | TDS Rates | TDS Amount | Threshold Limit |
|---|---|---|---|---|
| First Invoice | 29000 | 2% | Zero | Less than Single Transaction Threshold Limit 30,000 |
| Second Invoice | 29000 | 2% | Zero | Less than Single Transaction Threshold Limit 30,000 |
| Third Invoice | 29000 | 2% | Zero | Less than Single Transaction Threshold Limit 30,000 |
| Forth Invoice | 20000 | 2% | 2,140 (2% of 1,07,000 i.e. total of all invoices) | Exceeds TDS Threshold Limit 1,00,000 |
GL Entries for TDS where payment is less than threshold limits (first transaction where vendor has given the invoice for INR 29,000), will be as following:
Particulars Amount Purchases Account 29000 Vendor Account -29000 GL Entries for TDS where payment is less than threshold limits (second transaction where vendor has given the invoice for INR 29,000), will be as following:
Particulars Amount Purchases Account 29000 Vendor Account -29000 GL Entries for TDS where payment is less than threshold limits (third transaction where vendor has given the invoice for INR 29,000), will be as following:
Particulars Amount Purchases Account 29000 Vendor Account -29000 GL Entries for TDS where payment is more than (exceeding) Threshold limits (forth transaction where vendor has given the invoice for INR 20,000), will be as following:
Particulars Amount Purchases Account 29000 TDS Payable Account 2140 Vendor Account -29000