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Year-end expense provisions are booked to vendor accounts at 31 March without TDS, and the auditor flags late deduction.
A provision credited to a named party is a credit, so TDS is due on 31 March; deduct, deposit by 30 April, and reverse cleanly when the bill arrives.
A year-end provision list with party, PAN, nature, amount, section and whether the provision is party-wise or general.
TDS on every party-wise provision deposited by 30 April and reported in the fourth-quarter return.
Your auditor is usually right. A provision booked in a named party’s account at 31 March is a credit in your books, and TDS (tax deducted at source) is due at credit or payment, whichever is earlier. So TDS is due on 31 March even though nothing has been paid. A general provision with no party named is less clear-cut, and you should settle it with your CA.
Why does a provision count as a credit?
Under Section 194C, Section 194J and most other business TDS sections of the Income-tax Act 1961, tax is deducted “at the time of credit of such sum to the account of the payee or at the time of payment, whichever is earlier”. The Act also says a credit to a “suspense account” or any other name counts. From 1 April 2026, the same rule carries into Section 393 of the Income-tax Act 2025. A party-wise provision is exactly such a credit.
Why was the TDS missed?
| Provision type | Party named? | Why TDS was missed | TDS due | Deposit by |
|---|---|---|---|---|
| Audit fee to the audit firm | Yes | Software only deducts at payment | 31 March | 30 April |
| Legal fees to a law firm | Yes | Bill not yet received | 31 March | 30 April |
| Estimated freight, several transporters | No, general | Amounts per party unknown | Judgement area; often at bill date | Per CA view |
| Expected bonus to distributors | Partly | Treated as an estimate | Ask your CA | Per CA view |
| Rent for March | Yes | Booked as outstanding expense | 31 March | 30 April |
What if the bill arrives in April for work done in March?
If you booked a party-wise provision on 31 March, TDS belongs to March, even if the bill comes in April. When the bill arrives, reverse the provision against the bill. Do not deduct TDS again on the same amount. If the bill differs from the provision, deduct only on the difference. If you made no provision at all and simply booked the bill in April, TDS falls in April.
Worked example: a ₹2,36,000 audit-fee provision
A logistics company booked a provision for its statutory audit fee on 31 March 2026: ₹2,00,000 plus 18% GST of ₹36,000, total ₹2,36,000, credited to the audit firm’s account.
| Item | Amount |
|---|---|
| Audit fee excluding GST | ₹2,00,000 |
| GST at 18% (outside the TDS base) | ₹36,000 |
| TDS at 10% under Section 194J | ₹20,000 |
| Deposit by | 30 April 2026 |
TDS is ₹2,00,000 × 10% = ₹20,000. The GST is left out because it is shown separately (CBDT Circular 23 of 2017).
If the company only deducted when it paid the bill on 25 June 2026, it would owe interest under Section 201(1A) at 1% per month or part of a month from 31 March to 25 June. That is four months or parts: ₹20,000 × 1% × 4 = ₹800. Late filing of the return also adds a fee of ₹200 a day under Section 234E.
How does a March deduction appear in the vendor’s Form 26AS?
You report it in the quarterly TDS return for January to March, due by 31 May. After processing, the audit firm sees ₹20,000 in its TDS credit statement (Form 26AS for this period). Because the deduction is for the year ending 31 March 2026, the firm can claim it for that year, matching its own fee income.
What to read next
- Next in the timing series: TDS on retention money.
- For the full year-end checklist: TDS year-end March close.
- To clear provisions month by month: the monthly and quarterly TDS runbook.
TransactIG reconciles TDS payable against your ledger credits, so a party-wise provision without a deduction shows up in the exception queue before the return.