Requirement-Deduction of TDS on 31st march for Interest at maturity FD

[rohankamat1985]

Dear Friends,

We have a requirement in an Interest at maturity FD having simple interest calculation.

When the tenure of FD includes the 31st march date, the TDS should get deducted. At the same time, we are also performing monthly accrual.

How can we fulfill this requirement? Derived flow for TDS wont work here as TDS is getting deducted on 31st march without any payment of interest. Interest will be at maturity and will be simple interest.

If we try to fulfill this using Other flows for TDS, how can we subtract the TDS amount from future calculations of accrual and final interest calculation?

As TDS is deducted as of 31st march, future accrual interest will reduce by some extent. How to handle this?

Regards,

Rohan

[former_member198450]

Dear Rohan,

Requirement is not clear, Could you please put the same with number for better understanding of issue.

Regards,

Jain

[rohankamat1985]

Hi Jain,

I will explain the requirement in detail.

There is a Simple Interest Fixed Deposit of 3 months for 4,00,000 at 10% p.a.

Interest on maturity will be 10,000 and total TDS will be 1000 (TDS rate is 10% on interest)

Start Date- 15 March 2016

End Date-   15 June 2016

In simple interest, the TDS is deducted on maturity.

I have used derived flows for TDS which will flow when the Interest is credited on maturity i.e on 15 June 2016

But since 31st march is coming in between the tenure of FD, we need to deduct the TDS on 31st march on the accrued interest which is not actually paid to the client.

Interest will be paid on maturity only.

Interest accrued for 15 days as of 31st march will be 1666 and TDS on it will be 167.

I have to debit this TDS on 31st march 2016 and it should also adjust the TDS on maturity so that TDS on maturity is 1000-167= 833.

Derived flow will give a TDS of 1000 which will be wrong in my scenario as  some TDS is debited on 31st march 2016.

How can we achieve this?

Regards,

Rohan

[former_member198450]

Dear Rohan,

Only way is to do manual as per my experience. I cant  see any other way possible to do it.

Regards,

Jain

[rohankamat1985]

Hi Jain,

Thanks for your reply.

If we enter the manual entries, how will be the accounting taken care?

As of now, the accounting entries on maturity will be as follows:-

Dr. Clearing Ac            4,00,000

Cr. FD with Bank Ac    4,00,000

Dr.  Clearing Ac             10,000

Cr.  Interest on FD Ac    10,000

Dr.  TDS receivable A/c   1,000

Cr.  Clearing A/c              1,000

So net effect of interest is 9,000

What manual flow has to be posted on 31st march for 167 and how to adjust it against the maturity date?

We will have to make manual changes in maturity value also. And the overall net effect needs to be matched.

Regards,

Rohan

[former_member198450]

Dear Rohan,

Please create a flow type with category 90, Like below example.

So, you will have flow type: in you cash flow tab.

15.03.2016    -  1100    400,000 (INR)

31.03.2016    - 1905(Define your own)  167( Other flow tab)

15.06.2016     +1120        400000(INR)

15.06.2016     +1200        10000

15.06.2016     -19**          833( Go to edit and make manual changes for amount)

I presume accounting entry should be same as maturity, But i still recommend to check with business.

Hope this help.

Regards,

Jain

[rohankamat1985]

Hi Jain,

In above case, the net effect of interest credited on maturity will be 10,000-833 = 9167.

But the interest should be 9000 on maturity.

Account entries wont be same as maturity. On maturity, the interest is getting credited to bank account as shown in my earlier post.

The 31st march TDS entry should be different than that at maturity and its effect should still give interest amount of 9000 on maturity.

Regards,

Rohan

[former_member198450]

Hi Rohan,

Refer the below highlighted item.

Sorry flow type should be 1901 on 31.03.2016. Mistakenly updated as 1905.

Regards

Jain

[rohankamat1985]

Hi Jain,

Flow 1905 as mentioned by you earlier was correct. There is no much difference in 1901 and 1905. 1905 is used for interest and 1901 for charges.

But still after adding the other flow, the accounting along with the amounts will not happen in the intended way. Many manipulations/adjustments needs to be done for this case.

I am still exploring the solution for this.

Regards,

Rohan

[rohankamat1985]

Hi Friends,

Any idea how we can fulfill this requirement?

Regards,

Rohan

[Former Member]

Hi Rohan, You can use other flows to set up TDS and enable accrual for these flows as well (if needed). However, not clear why future interest calculation will be reduced due to TDS? Is the monthly interest accruals added to FD Position amount? In general TDS is applicable whenever there is a payment cashflow due not against accrual. Regards Prasad AV

[rohankamat1985]

Hi Prasad,

Thanks for your reply.

No, interest accrual is not added to the FD position amount.

This requirement is in simple interest FD where the actual interest is paid only on maturity.

But if 31st march comes between the FD tenure, we have to deduct the TDS on 31st march.

(Eg- FD start and end dates are 15 feb and 15 may respectively)

But I am confused here, since Interest is paid on maturity, from where we need to debit the TDS on 31st march?

Regards,

Rohan

[rohankamat1985]

Hi Prasad,

In case of simple interest FDs, the cash flow of interest is not happening in between. The cash flow happens only on maturity.

The TDS needs to be debited from accrued interest without any actual interest cash flow.

This is the requirement of the client. How can we achieve this?

Also, the accounting needs to be taken care in this case.

Regards,

Rohan