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TDS setup for India

Hi,

I am currently setting up the TDS configurations for my India entity. From my research, TDS is actually the withholding tax in India. I have already set up all the tax code and tax type in the extended withholdng tax. However, I heard that TDS has the requirement of Threshold where the withholding tax calculation will only start when the total payment amount is more than a certain threshold. Is that correct?

For example,

Contractor A:

1st Payment - January 2008 RS 5,000

2nd Payment - March 2008 10,000

3rd Payment - June 2008 10,000

4th Payment - October 2008 30,000

There are 4 payments to contractor A as shown above. According to what I understand, TDS will be only be applicable at the 4th payment stage but it will calculated the total amount of TDS from 1st payment to 4th payment, and the whole TDS amount will be deducted from 4th payment. Also the rule here is TDS deduction should be at the stage of booking of Invoice or payment of invoice whichever is earlier.

Is what I have describe in the example above correct? If it is correct, how do I set up the threshold in SAP? Thank you for your kind help.

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6 Answers

  • Posted on Feb 10, 2009 at 09:09 AM

    Hello Lee,

    At the time of creation withholding tax type you have to choose accumulation because of this system will cummulative the invoice amounts for that vendor. Once the minimum withholding tax amount exceeds then system will deduct TDS from 1 rupee.

    Regards,

    Sankar

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  • Posted on Feb 10, 2009 at 09:10 AM

    Hi ZK,

    In the TDS configuration, Define Withholding Tax Types You have to put a tick in the "Per Year, Starting with Month" accumulation type & enter the starting month.

    Next in the define witholding tax code you have to put a tick in the box "wtax form" in the calculation Tab.

    Next in the define formulas for calculating withholding tax you have to enter the formulas for calculating tax as follows:

    To base Amount, Witholding Tax Rate etc. can be maintained.

    Hope this helps.

    Regards,

    AVD.

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    • Hello,

      To specify minimum amount at withhodling tax code level go with the below path:

      Financial accounting (new)- Financial accounting and global settings (new)-withholding tax-extended withholding tax-calculation-minimum and maximum amounts- define minimum and maximum amounts for withholding tax codes.

      Regards,

      Sankar

  • Posted on Feb 10, 2009 at 09:13 AM

    Hi ZK,

    There are two types of withholding Taxes,

    1.Standard Withholding tax

    SWT is the procedure that has always been supported by the system some of the features are as follows--

    1.withholding tax for Account payables.

    2.WT for calculation during payment.

    3.WT per vendor line item.

    Extended WT provides additional features--

    1.Multiple Withholding Taxes per customer or vendor line item.

    2.WT calculation for partial payments.

    Extended withholding tax as per indian standards deducted on the rule whichever comes earlier whether its payment or invoice.

    Thanks

    Deepa

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  • Posted on Feb 10, 2009 at 09:43 AM

    Hi ZK,

    If I choose the "Per Year, Starting with Month" accumulation type, does that mean that it will accumulate everything for 1 year before triggering the calculation for the TDS?

    Yes it will od that based on the formauls you have maintained.

    What I need is actually to trigger the calculation for TDS once the total amount of the payments exceed certain value, say 50000 Rs. How can I do that?

    You have set up formulas as mentioned in the previos thread.

    Please kindly help by providing me with the steps to configure.

    Search for Extended Witholding Tax Configuration guide on Google & you should be able to get it easily.

    Regards,

    AVD

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  • Posted on Feb 10, 2009 at 10:20 AM

    Dear Mr. Lee,

    As per Indian Income tax law your requirement is correct.

    You can achieve the above with 'Accumulation + Forumla's Fuctionality.

    Accumulation + Formula's functionality you can use for year wise.

    Need to do the three steps.

    1. Tax type : Select the Accumulation ' per year, starting with month 4

    2. tax code : please maintain the 'W.tax.Form' checkbox (don't maintain the tax rate)

    3. at SPRO .....EWT ....Define Formulas for calculating withholding tax

    here maintain the tax rates base don formulation.

    upt 20000 rate is nil

    upto 100000 rate is 10 %

    ....

    Thoushold limit separete for payment type and Invoice type separetly.

    EWT functionality

    F-48 (TDS full)

    FB60 MIRO (TDS full)

    F-54 (TDS reversal).

    F-53 (TDS nil).

    I hope above information will resolve your issue.

    If you need any further help please give me your direct conctact no.

    Reg

    Madhu M

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  • Posted on Feb 11, 2009 at 11:43 AM

    Dear Lee,

    could you please arrange the your direct no ?

    Reg

    madhu M

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    • Former Member Former Member

      Hi Lee,

      Were you able to solve the above requirement -

      "So for amount of payment where single payment is less than 20,000/- TDS will be deducted first time after reaching slab of Rs. 50,000/-

      However after that slab on every payment there will be TDS deduction separately without any cumulative effect."

      Please post the solution if found

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