cancel
Showing results for 
Search instead for 
Did you mean: 

TDS Tax codes

Former Member
0 Kudos

Hi

Dear friends, please tell me why do we require two type of tax codes in TDS like tax code for invoice posting & tax code for payment. Please explain briefly the scenario for each case.

Regards

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
0 Kudos

Hi,

Regarding TDS you have to understand the basic that when & how the Tax is deducted

According to Income Tax Act 1961 TDS can be done for the payments made to any vendor if the invoice amount crosses the amount specified in the act

TDS will come in to picture when an advance payment ( Down payment) is made and @ the time of invoice

In both the cases we have to deduct the Tax Surcharge & E cess to map this seperately we use seperate tax codes for DP & Invoice

And if u check in vendor master we can see that each vendor will be linked to both the tax codes so that if we make a DP or settlement to vendor the Tax is deducted

Hope this will clear your doubts

Regards

Arun

Former Member
0 Kudos

Hi Arun

Please go through the following whether my understanding is correct:

Tax code at the time of invoice:

Here we will enter the invoice value including TDS (?) and apply the tax code defined for invoice posting and the system then splits the invoice value into purchase value + TDS amounts applicable. Then we make the final payment and at that time we will not mention any TDS tax codes and the system automatically adjust the entries and clear the invoice.

Tax code at the time of payment:

Here I am required to make a downpayment. At the time of downpayment, I will post the downpayment with a tax code defined for payment and the system debits the applicable TDS on the downpayment. I then post the invoice for purchase. What would be my amount of invoice in this case ? Do I need to enter a tax code on this invoice ? I then post the final payment and I apply the tax code (defined for payment) at the time of payment. System then adjust the downpayment and clears the invoice with the balance amount. Is my understanding correct ?

I am confused what would be the amount of invoice I should be putting in both these cases.

If you do not mind, please clarify me taking these two situations separately.

Thanx in advance.

Regards

Former Member
0 Kudos

Hi

In the vendor master you have to assign the tax codes and tax types for both invoice and payment. When u post a vendor down payment, system will automatically deduct the TDS based on the tax code assigned in vendor master for payment. Now , you will post the vendor invoice. System will again deduct the TDS based on the invoice tax code. However, when you adjust the invoice against the down payment system will automatically adjust the down payment TDS against the TDS deducted at the time of invoice.

Regards

Sanil Bhandari

Former Member
0 Kudos

Hi ,

You need not select the tax codes for TDS like what we are doing for input tax or out put tax ( Sales Tax Excise Etc...)

1. You are creating tax codes for both payment (Let it be P) & invoice ( Let it be I ) and the calculation is entered there in tax code ( Pls note tax codes are created according to the income tax sections for TDS )

2.Then we assign taxcodes P & I in vendor master ( vendor X )

3.When we book down payment(Pls Note Down payment will be made through splcial gl indicator) to X it will automatically deduct the TDS in accordance with tax code P

4.Now lets come to the invoice for the same DP made at this point when we make the invoice recipt of the X it will automatically gives a pop up that down payment xxxx is made and then it will knock of the effect of down payment and will calculate TDS on the net payemnt @ invoice using tax code I

Hope now the process is clear

Regards

Arun

Former Member
0 Kudos

Thank you very much.

Regards

Answers (3)

Answers (3)

saikrishna_vallurupalli
Active Contributor
0 Kudos

As per the income tax act tds will be deducted at the time of provision(invoice) or payment(down payment) which ever is earlier, for identification of deduction we will create separate tax type and tax code for payment and invoice.

may be you are aware for one tax type u can assign no of tax codes.

The withholding tax type controls the essential calculation options for

extended withholding tax, whilst the withholding tax code only controls

the percentage rate of the withholding tax.

You must enter the withholding tax type in the customer/vendor

withholding tax master data and in the company code master data.

The system recognizes two categories of withholding tax type depending

on when the withholding tax amounts are posted:

o Posting with invoice

o Posting with payment

Former Member
0 Kudos

Hi,

There is rule in India that a company is liable to decuct TDS at the

  • time of Invoice creation

  • Payment is made in either way of down payment or settlement

In both scenario company is liable to deduct TDS

Hence for both scenario we have to configure two condition /tax code.

Regards

Pari

Former Member
0 Kudos

Hi babu,

Normally tax we deducts while doing invoice verfication and some times we will give advance payments for that also we have to deduct some tax(TDS)

so two types of TDS codes we are creating.

Any doubt feel free to ask

Regards

Surya

Former Member
0 Kudos

Thanx for the quick response.

May I put it as follows:

In the normal case, we have to split the invoice total amount into item value and tax amounts (TDS). Right ? For that we have to apply a tax code defined for invoicing.

An the tax code defined for payment is used only in the case of downpayment. Is it ? That means, we do not have to apply a tax code in the invoice and we have to apply a tax code defined for payment in the downpayment as well as final payment. Am I correct ? If this is the case, the invoice amount should be including tax value, right ?. Please tell me your views on this briefly.

Regards

Former Member
0 Kudos

If you given downpayment with TDS ofter that while creating of invoice of this downpayment that time we shoudnt assign tax codes of invoice and before assign tax code system will ask is it applicable or not.that time we can give no tax tax code.

Regards

Surya

Former Member
0 Kudos

You are really confusing me. From your sentence structure, I am not able to understand anything. Could you please give your comments point wise ?

Regards

Former Member
0 Kudos

Ok babu

1 downpayment with TDS

2 create invoice of this downpayment that time we shoudnt assign tax codes (Means no TDS)

for that system will ask is it applicable tax codes or not in invoice verfication time .that time we can give no tax tax code.

Former Member
0 Kudos

Thanx Naveen.

Regards