Professional Documents
Culture Documents
For:
SAP India
INTRODUCTION.............................................................................................................................1
1INTRODUCTION AND JUSTIFICATION.........................................................................................................2
1Introduction...........................................................................................................................2
2Justification...........................................................................................................................2
3Who will deduct Tax..............................................................................................................2
4Observance of income arise / accrual, whichever is earlier.................................................2
2SETUP..........................................................................................................................................3
SETUP............................................................................................................................................3
5Company Details...................................................................................................................3
6TDS Setup.............................................................................................................................4
7Define TDS Financial Year....................................................................................................4
8State Master..........................................................................................................................5
9Chart of Accounts.................................................................................................................6
10Define Certificate Series......................................................................................................7
11Define Sections...................................................................................................................7
12Define Assessee Type.........................................................................................................8
13Define Category...................................................................................................................9
14Define TDS Master.............................................................................................................10
15Define TDS Concession....................................................................................................11
16Business Partner Setup....................................................................................................12
17Business Partner tax Information.....................................................................................14
18Business Partner WT Code Allowed.................................................................................14
19Item Master Data ...............................................................................................................16
20TDS Payment Accounts (Sales Tax paid account)............................................................16
TRANSACTIONS...........................................................................................................................18
3TRANSACTIONS..............................................................................................................................19
20.1Overview.........................................................................................................................19
21A/P Invoices.......................................................................................................................20
22A/P Credit Memo...............................................................................................................25
23Outgoing Advance Payments...........................................................................................27
24A/P Down Payment Request.............................................................................................32
25Payment on Account.........................................................................................................36
26TDS Adjustment Entry.......................................................................................................38
27Payment of TDS Amount to Government..........................................................................40
28Update Challan Details......................................................................................................41
29TDS Certificate Number Generation..................................................................................42
30TDS Certificate – Form 16A...............................................................................................42
30.1TDS Certificate – Form 27A............................................................................................44
31Incoming Payments...........................................................................................................45
Introduction
1 Introduction and Justification
1 Introduction
Tax deducted at source is one of the modes of indirect collection of Income Tax from the
assessees. Such collection of tax is effected at the source when income arises or accrues.
Hence where any specified type of income arises or accrues to any party, the Income-Tax
Act enjoins on the payer of such income to deduct a stipulated percentage of such income by
way of Income tax and pay only the balance amount to the recipient of such income.
The tax so deducted at source by the payer has to be deposited in the Government treasury
to the credit of Central Govt. within the specified time. The tax so deducted from the income
of the recipient is deemed to be payment of Income tax by the recipient at the time of his
assessment.
Income from several sources is subject to tax deduction at source. Some of such income
subjected to TDS are rent, fees for professional or technical services, commission,
brokerage, salary, interest, dividend, interest on securities, winnings from lottery, horse races
etc
2 Justification
Section 4(2) of the Indian Income Tax Act 1961, specifies that income will be chargeable to
tax at source or should be paid in advance where it is so deductible or payable under any
provisions of the Act at the rates applicable for the relevant year.
Chapter XVII of the Indian Income Tax Act 1961 covers the entire scope and method of
deduction at source. The payments, which are supposed to be taxed, are specified across
sections from section 192 to section 206.
Section 204 of the Income Tax Act specifies as to who is responsible for deducting Tax. For
example in case of Professional Service, the organization taking the services is the taxing
authority, when making the payment or creating the Invoice, whichever is earlier.
The Income Tax Act has clearly specified in all the relevant sections that tax deduction has to
happen on crediting a person’s account or on payment, whichever is earlier.
2 Setup
5 Company Details
Setup
6 TDS Setup
This screen provides the information for creating challan details and Form 16A i.e. the name
of the person responsible for deducting tax.
Specify the Accounting Periods to be followed here. As per the Income Tax Act, 1961, the
financial period to be followed is April to March.
TDS will be calculated for the financial year defined in the screen below.
If any transactions take place for the TDS financial year that is not defined then TDS will not
be recorded for those transactions.
Field Name Activity / Description
Code Enter unique code for the TDS financial year. As per the e-
TDS return specification it should be 8 characters and for
example for financial year 2005-06 code should be given
20052006.
Description Enter description for the TDS financial year here.
From Date Enter the starting date for the TDS financial year here.
ToDate Enter the ending date for the TDS financial year here.
Assessment Enter the assessment year. As per the e-TDS return
specification it should be 8 characters and for example for
assessment year 2006-07 code should be given 20062007.
8 State Master
Navigation: Navigation: Business Partner Business Partner Master Data Addresses Tab
State Field Define New
Enter the TDS State code corresponding to each state code here. Income Tax authority has
given two digit numeric codes to each state. This State Code appears in the e-TDS return.
9 Chart of Accounts
11 Define Sections
Chapter XVII of the Indian Income Tax Act 1961 covers the entire scope and method of
deduction at source. The payments, which are supposed to be taxed, are specified across
sections from section 192 to section 206.
13 Define Category
TDS Category defines the nature of transaction for which TDS would be applicable, the
threshold limit for TDS deduction, surcharge threshold limit for TDS deduction, section
under which TDS would be applicable, TDS Payable account for the category and the
number sequence for TDS certificates.
In TDS Master, TDS Rates are defined for a combination of “TDS Category Code”,
“Assessee Code” and “Effective Date”.
In all the TDS transactions “WT Code” is mapped that in turn maps the TDS Category and
Assessee Type and corresponding TDS Component Rates as is evident from above screen.
This screen is used to define the TDS rates at a concession rates. These rates can be
applied to any vendor based on the requirement.
Every record in TDS Concession Data creates two records in “Define Withholding Tax” as
shown in the screen below. Note that for financial posting “TDS Add-on” make use of
Withholding Tax functionality of SAP B1 after applying calculation rules for TDS.
Navigation: Business Partner Business Partner Master Data Accounting Tab Tax Tab
Setup TDS related information such as Income Tax information, whether a BP is liable for
TDS, what categories are applicable and which one is default etc.
Field Name Activity / Description
Tax Information Click button to open “Tax Information” screen. (Refer Section
2.9 Business Partner tax information) Income tax related
information for Business Partner is defined in this screen.
Subject to Withholding Check this “Check Box” if TDS is to be calculated for this
Tax Business Partner.
WT Code Allowed Click button to open “WT Code Allowed” screen (Refer
section 2.10 Business Partner WT Code Allowed) to select
the applicable “TDS Categories” for the Business Partner.
TDS Overlook Check this “Check Box” if Base TDS Amount is to be
calculated from very first transaction for this business
partner even though the TDS threshold limit is not crossed.
Surcharge Overlook Check this “Check Box” if Surcharge Amount is to be
calculated from very first transaction for this business
partner even though the Surcharge threshold limit is not
crossed.
Note: Currency should be “Multiple Currency” for the business partners that are subject to
TDS.
17 Business Partner tax Information
Navigation: Business Partner Business Partner Master Data Accounting Tab Tax Tab
Tax Information Button
Navigation: Business Partner Business Partner Master Data Accounting Tab Tax Tab
WT Code Allowed Button
Select the TDS Categories allowed for the business partner here. More than 1 category can
be selected but only 1 category can be set as default.
Note: System does not impose any restriction if user selects Codes that corresponds to
multiple Assessee Codes. User needs to take care of this validation.
19 Item Master Data
Not all items are liable to TDS deductions. Specify whether an item is subject to TDS here
Note: System does not impose any restriction if user checks this box for “Inventory” item.
20.1 Overview
Various business transactions scenarios, which are addressed by the TDS functionality, are
mentioned below:
• A/p Invoice created by selecting the “A/p invoice” menu option under the purchase
module for the “Service” Type
• A/p Invoice created using the “Copy From GRPO” option of Item Type.
• A/p Invoice created using the “Copy From Purchase Order” option of “Item” Type.
• A/p Invoice created using the “Copy From GRPO” option of “Service” Type.
• A/p Invoice created using the “Copy From Purchase Order” option of “Service” Type.
• A/p Invoice created using the “Copy To” option from Purchase Order Document for
the “Item” Type
• A/p Invoice created using the “Copy To” option from Good Receipt Option Document
for the “Item” Type.
• A/p Invoice created using the “Copy To” options from Purchase Order Document for
the “Service” Type.
• A/p Invoice created using the “Copy To” options from Good Receipt Document for the
“Service” Type.
• A/p Invoice created from the Draft A/p invoice of “Service” Type
• A/p Invoice created from the Draft A/p invoice of “Item” Type.
• A/p Invoice created based on the Approval Procedure of “Service Type” just as
above.
• A/p Invoice created while multiple copies of the A/p invoices document is opened
both (or all) from main menu.
• A/p Invoices created while multiple copies of the A/p invoices document are opened
from main menu.
• A/p Invoices created while multiple copies of the A/p invoices document are opened
from main menu and also opened simultaneously through “Copy To” options GRPO
or Purchase Order.
• A/p Invoices created while multiple copies of the A/p invoices document are opened
from main menu and also opened simultaneously through “Copy from” options in the
same document.
When an AP Invoice for a vendor is recorded, based on the TDS Setup for vendor and items,
the system calculates the TDS amount and defaults it in “WT Amount” field. If the Invoice is
against a down payment(s) (Advance), click on “Total Down Payment” and select the down
payment(s). The system recalculates the TDS amount after netting off the down-payment.
The Orange Arrow next to “WT Amount” field launches a screen, which defaults TDS details
including TDS Base Amount, Surcharge Amount, eCess Amount, HeCess Amount and
percentage for these components.
If the transaction is for a different Category, choose the applicable category and system
recalculates TDS Amount according to the selected category.
On clicking on the “Show TDS Details” button, “TDS Table” screen launches and this screen
has the details of the TDS deducted.
On clicking on “Add” button, system asks if you would want to open Withholding tax Table.
Click yes if TDS was not calculated or for rounding off the TDS amount or transaction is for a
different category than the default category.
Notes
• If the “Calc type” for the TDS Category is NET then tax amount is NOT included in the
TDS calculations.
• If the Calc type for the TDS Category is GROSS then tax amount is included in the TDS
Calculations.
• WT Liable Additional expenses at the line and document level are included in TDS
calculations.
• A/P Credit Memo created by selecting the “A/p Credit Memo” menu option under the
purchase module for the “Service” Type
• A/P Credit Memo created by selecting the “A/p Credit Memo” menu option under the
purchase module for the “Item” Type
• A/P Credit Memo created from the Draft mode of “Service” Type
• A/P Credit Memo created from the Draft mode of “Item” Type.
• A/ P Credit Memo can also be created based on the Approval Procedure of “Item Type”
or “Service Type” just like A/P Invoice which can be seen in A/P Invoice screen shot
based on approval procedure.
A/P Credit memo is created for the purpose of reversing the transaction (i.e. Journal Entry). If
TDS has been deducted more for the particular vendor then A/P Credit Memo is created for
balancing the transaction.
A/P Down Payment Invoice can also be created by following the scenarios mentioned below
just like A/P Invoice:-
• A/p Down payment Invoice created by selecting the “A/p Down payment invoice” menu
option under the purchase module for the “Item” Type
• A/p Down payment Invoice created by selecting the “A/p invoice Down payment” menu
option under the purchase module for the “Service” Type
• A/p Invoice Down payment created using the “Copy From GRPO” option of Item Type.
• A/p Invoice Down payment created using the “Copy From Purchase Order” option of
“Item” Type.
• A/p Down payment Invoice created using the “Copy From Purchase Order” option of
“SERVICE” Type.
• A/p Down payment Invoice created using the “Copy From GRPO” option of “Service”
Type.
• A/p Down payment Invoice created from the Draft mode of “Service” Type
• A/p Down payment Invoice created from the Draft mode of “Item” Type.
Outgoing Advance Payment is essentially a two step process, First AP Down Payment
Invoice is posted and any TDS applicable is calculated here. Then an outgoing payment is
made against A/P Down Payment Invoice through Banking Outgoing payments.
At the time an invoice is recorded, any Advance payment (A/P Down Payment Invoice and
corresponding Outgoing Payment) made earlier can be applied to the invoice by selecting
A/P down payment invoice. System recalculates TDS by netting AP Down Payment Invoice
Amount with Invoice Amount.
For example let’s create an A/P Down Payment Invoice for INR 10000 as shown in the
screen below
System calculates total TDS of 1071 at the rate of 10.71%. Add the invoice and click on
“Banking Outgoing Payments Outgoing Payments” and make the payment of INR 9829
against this A/P DP Invoice.
Add the payment and after adding only AP DP can be pulled in AP Invoice.
Now create an A/P invoice of INR 20000. System calculates total TDS of 2142 at the rate of
10.71% as shown in the screen below
Click on the “Total Down Payment” button and “Down Payments to Draw” screen opens
showing available A/P down payments available for application against invoice.
Highlight the required A/P DP Invoice and click “Ok” button. TDS gets recalculated on
differential amount of Invoice Value and A/P down payment invoice value that is INR 20000 –
INR 10000 = INR 10000 as shown in the screen below
A/P Down Payment Request document can be created by following the scenarios mentioned
below just as in A/P Invoice and A/P Down payment Invoice:-
• A/p Down payment Request Invoice created by selecting the “A/p Down payment
Request invoice” menu option under the purchase module for the “Item” Type
• A/p Invoice Down payment Request created using the “Copy From GRPO” option of Item
Type.
• A/p Invoice Down payment Request created using the “Copy From Purchase Order”
option of “Item” Type.
• A/p Down payment Request created using the “Copy From Purchase Order” option of
“SERVICE” Type.
• A/p Down payment Request created using the “Copy From GRPO” option of “Service”
Type.
• A/p Down payment Request created from the Draft mode of “Service” Type
• A/p Down payment Request created from the Draft mode of “Item” Type.
System also calculates the TDS while adding an A/P Down Payment Request. As you can
see above TDS is calculated of Rs. 6660 based on the percentage defined there in TDS
Category Master and is the total of TDS amount, surcharge amount, eCess amount and
HeCess amount (Higher Education Cess - a new concept imposed by the government
recently in the year 2007).
The Golden Arrow next to “WT Amount” field launches a screen, which shows the TDS
details including TDS Base Amount, Surcharge Amount, eCess and HeCess Amount and
percentage.
If the transaction is for a different Category, choose the applicable category and system
recalculates TDS Amount according to the selected category.
On clicking on the “Show TDS Details” button, “TDS Table” screen launches and this screen
has the details of the TDS deducted.
On clicking on “Add” button, system asks if you would want to open Withholding tax Table.
Click yes if TDS was not calculated or transaction is for a different category than the default
category.
Notes
• If the “Calc type” for the TDS Category is NET then tax amount is NOT included in the
TDS calculations.
• If the Calc type for the TDS Category is GROSS then tax amount is included in the TDS
Calculations.
• WT Liable Additional expenses at the line and document level are included in TDS
calculations.
TDS on advance payment can be deducted through outgoing payment based on “Payment
on Account” selection.
Points to remember:-
Clicking the “Show TDS Details” button will launch a screen, which shows the TDS details
including TDS Base Amount, Surcharge Amount, eCess and HeCess Amount and
percentage as shown in the screen below:
26 TDS Adjustment Entry
In case TDS is deducted erroneously, it can be corrected through “TDS Adjustment Entry”.
Field Name Activity / Description
Transaction Type Select the Transaction Type for which adjustment is to be
done.
Transaction No Enter the transaction no for which TDS adjustment is to be
done.
TDS Base This is “TDS Base Amount” of the original entry. (non-
editable)
TDS % This is “TDS %” of the original entry. (non-editable)
Surcharge Base This is “Surcharge Base Amount” of the original entry. (non-
editable)
Surcharge % This is “Surcharge %” of the original entry. (non-editable)
New TDS% Enter the new “TDS %” here.
New Surcharge % Enter the new “Surcharge %” here
New TDS On entering “New TDS %” and “New Surcharge %” system
has calculated new TDS and shown in this field. On update
system creates a new journal entry for the differential
amount of “New TDS” and “Total TDS”. In this example
3927 – 3141.60 = 785.40.
Document Series Select the Document Series for which adjustment is to be
done.
On click of Update, journal entry is posted debiting vendor and crediting “TDS payable
Account” of original TDS entry for the differential amount of Original TDS amount and New
TDS Amount as shown in the screen below
Select option Account and G/L Account in which TDS Liability has been posted. To select the
transactions for which TDS is to be paid to Govt. click on the button “Pick TDS Entries”.
Following screen will load where entries against which TDS is being paid to the Govt. can be
selected. A click on “Choose All” will select all entries in the screen and “Clear All” will clear
any selection made.
Choose the entries for which TDS is to be paid and click Add. The total sum of all the
selected entries will be filled in Amount Field in Outgoing Payment Screen and Amount field
becomes non-editable. Open the Payment Means screen and select the payment means and
click Add. Data can also be sorted based on the Category type and Assessee Type drop
down.
TDS Update is a register to be maintained to keep track of all the TDS payments made to the
government with relevant challan details. TDS challan is made to government Section wise.
The challan number, challan date and bank name is updated using this functionality which
has to be updated for each transaction to be printed on TDS certificate.
Select the Section Code and all entries for that section will appear in the grid. Select the
entries for which the Challan Details will be updated. Click on Add Button. This will load
another screen to enter relevant challan as shown in the screen below
Enter Bank Serial No., Challan No, Challan Date and Bank Name and cheque number. This
information is mandatory as it appear on the TDS Certificates and Returns.
TDS Certificate Number Generation is used to generate the certificate number for the
certificates to be issued to the Business Partner for the TDS deducted and paid on
transaction of various TDS Categories.
Enter the Business Partner, TDS Category and date range for which TDS certificate is to be
generated. Click on Update and TDS Certificate will be generated from the No. Series
attached to the TDS Category in “TDS Category Master”.
Enter Financial Year, Quarter, Place and Designation (if not given in “Employee Master
Data”) for which TDS Certificate to be generated. System shows the TDS Certificate as
below:
31 Incoming Payments
While receiving incoming payments, if customer has deducted TDS Amount, enter the
amount in “TDS Amount” field. System posts a journal entry for “TDS Amount” by debiting the
“TDS Payment Account” and crediting the customer when incoming payment is added by
clicking Add button. However this amount is not reconciled against any Invoice even if
payment is received against invoices. A manual reconciliation through Banking
Reconciliations is required to reconcile journal entry and invoice for which TDS was deducted
by the customer.
Balance against Invoice and journal entry can be reconciled by clicking on “Banking Bank
Statements and Reconciliations Reconciliations” as and select the parameters as shown
in following screen
Click on reconcile and following screen will load
Select the entries to be reconciled and click on Reconcile button. After this reconciliation
following is the Customer Aging Report where above reconciled entries do not exist
Currently TDS has not been implemented on “Payment on Account” on Incoming Payment.