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A receivable is closed short and the accountant cannot tell whether the gap is TDS, a charge, a discount or a dispute.
Divide the shortfall by the pre-GST invoice value; a result of 0.1, 1, 2 or 10 percent is a TDS signature, while 2 percent of taxable value from a government buyer suggests GST TDS under Section 51.
Customer ledger with invoice gross, pre-GST value, amount received, shortfall, shortfall percentage and the remittance advice reference.
Each short payment is classified as TDS receivable, GST TDS, charge, discount or dispute, and only genuine disputes go to collections.
Short answer: Work out the shortfall, then divide it by the invoice value before GST. If the answer is a common TDS rate (0.1%, 1%, 2% or 10%), the difference is very probably TDS. Confirm it with the customer’s payment advice, then book it as TDS receivable, not as a discount or bad debt.
What could the difference be?
| Cause | Tell-tale arithmetic | Where to confirm |
|---|---|---|
| TDS on contract work (Section 194C) | 1% (individual/HUF) or 2% (others) of pre-GST value | Payment advice, Form 26AS |
| TDS on professional or technical fees (Section 194J) | 10% (professional) or 2% (technical services) of pre-GST value | Payment advice, Form 26AS |
| TDS on commission (Section 194H) | 2% of pre-GST value (from 1 October 2024) | Payment advice, Form 26AS |
| TDS on purchase of goods (Section 194Q) | 0.1% of the value above the buyer’s threshold | Payment advice, Form 26AS |
| GST TDS by a government buyer (Section 51 CGST) | 2% of taxable value | GST portal, electronic cash ledger |
| Bank or transfer charges | Small round amounts | Bank statement narration |
| Early-payment discount | The agreed percentage | Contract or credit terms |
| Credit note, return or debit note | Matches a specific document | Customer ledger |
| Genuine short payment | No pattern | Ask the customer |
If one shortfall mixes two causes (TDS plus a bank charge, say), take out the small charge first and test the rest.
Worked example: ₹1,18,000 invoice, ₹1,08,000 received
You raised a ₹1,18,000 invoice for consulting: ₹1,00,000 fee plus ₹18,000 GST at 18%. The bank shows a credit of ₹1,08,000.
- Shortfall: ₹1,18,000 − ₹1,08,000 = ₹10,000.
- Test: ₹10,000 ÷ ₹1,00,000 (value before GST) = 10%.
- Reading: 10% on a professional fee is the Section 194J rate. This is a TDS signature.
If you had divided by the gross ₹1,18,000, you would get about 8.47%, which matches no rate. That is why the pre-GST value matters. Had the customer also deducted on the GST, the TDS would be ₹11,800 and you would have ₹1,800 of over-deduction to raise (see the next article).
Book it like this: debit Bank ₹1,08,000, debit TDS receivable ₹10,000, credit Customer ₹1,18,000. The invoice closes in full.
How do I split TDS from a genuine short payment?
Check three things in order:
- Payment advice or remittance advice. Most companies email one with each payment. It usually lists the gross, the TDS and the net.
- Customer ledger. Look for credit notes, debit notes or earlier advances that were adjusted.
- Rate test. If the advice is silent, apply the table above.
Anything left after these three checks is a real dispute and goes to whoever handles collections.
What if there is no remittance advice?
Ask the customer for the TDS certificate (Form 16A, or Form 131 from tax year 2026-27) or the challan details. Then, after their quarterly return due date (31 July, 31 October, 31 January or 31 May), check that the amount appears against your PAN in Form 26AS (Form 168 from tax year 2026-27). Until then, keep it in TDS receivable with a note.
What to read next
- If the deduction looks too high, read my customer deducted more TDS than needed: can I get the extra back?
- Invoice matching with TDS: net vs gross reconciliation
- TDS credit recovery: operating process for receivers
Matching net bank credits to gross invoices by hand gets slow when hundreds of receipts arrive each month. TransactIG matches bank statement lines to the books, reconciles TDS and puts unexplained short payments in an exception queue; see TDS reconciliation software.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →