If a substantial advance payment is made to a contractor with whom there is a contract of work or service whether we have to deduct TDS on such advance payment. If yes then under which provision of Income tax Act. In case the contract is terminated before completion of the work or before raising of the bill for the said work what will be the treatment with such amount which has earlier been deducted and deposited with the government. Advance paid to the contractor is asset for the payee and it is liability in the books of the receiver till the bill is raised and income is realised. Can the contractor claim credit for the tax paid (TDS) on the basis of Form 16A for the amount that has been received by him as advance and kept as liability in its books and is not realised as income.