TDS setup for India

[Former Member]

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.

[m_madhu]

Dear Lee,

could you please arrange the your direct no ?

Reg

madhu M

[Former Member]

Hi,

My direct number is +65 64236149. I am working in Singapore and is only available during 9.00 am to 6.00 pm daily. However, as I am on leave for thr next 2 weeks, I would think it would be better to get your advise through the forum.

I have actually try to configure according to what you have advise me. However, when I go into the table WITH_ITEM, the withholding tax amount is always 0. Only the Accumulated Withholding tax Base amount is populated with the sum of the gross amounts of the invoices.

Actually, the requirements which I need to accomplish is as follows:

TDS Deduction will be attracted in case of any one of the following conditions are satisfied.

1. Payment is more than 20,000/-

2. Cumulative payments during the year exceed Rs. 50,000/-

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.

Any ideas whether the above conditions can be configured in SAP? Please help urgently. Thank you.

[m_madhu]

Dear Lee,

please maintain the all config

as per EWT above both condition is not posible.

you have any doubts please give me a ring.

Reg

Madhu M

Edited by: M Madhu on Mar 6, 2009 5:32 PM

[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

[m_madhu]

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

[Former Member]

Hi,

Thanks for all your guidance. I followed the steps and configure the tax type for payment level, tax code and the fomula for calculating. However, after I do the payment, I cannot find any entries of the payment in the table WITH_ITEM. I think I may be missing something here. Below are the steps which I have done, please kindly advise where the error can be. Thank you.

For Tax Type:

1) Create a Tax Type "Z1" for withholding tax at Payment level

2) The base amount is set to "Gross Amount"

3) The accumulation type is set to "Per Year, Starting with Mnth" and the month is set to "1"

4) Tick the "W/tax for Pmnts" checkbix under the control data

5) I did not change the rest of the default settings. I did not tick the "Combined accum" checkbox.

For Tax Code:

1) Create a Tax Code "C1" for the Tax Type Z1 created above

2) Set the "Percentage subject to tax" to "100" %

3) Set the "Post.indic." to "1"

4) Tick the "W.tax Form." checkbox.

5) I did not change the rest of the default settings. I did not specific any With/tax rate.

For Formulas for Calculating Withholding Tax:

1) In the grid display to enter formulas, I entered the following:

a) "To" base amnt = 2000, WhldTax = 0

b) "To" base amnt = 5000, WhldTax = 10

2) I did not enter anything for the rest of the fields in the grid display.

From the formulas above, I am trying to achieve the objective:

a) if the accumulated amount is less than $2000, the withholding tax rate is 0%.

b) if the accumulated amount is between than $2000 and $5000, the withholding tax rate is 10%

To test my configuartions, I have created 1 invoice of $3000 and do the payment run. Next, I created another invoice of $3000 and do the payment run again. However, after these 2 payment runs, I cannot see any entries in the table WITH_ITEM.

Please kindly help to see whether I have miss out anything or I have done something wrongly. Thank you.

[Former Member]

Hi,

can someone please help. Thank you.

[durgasankar_innamuri]

Hello lee,

in the withholding tax type select the option central inv.prop.

check accumulate withholding tax amount is selected or not

Post withholding tax amount button selected or not.

For the TDS gl account check the field status variant(OBC4)

Finally check what is the minumum and maximum maintained at withholding tax type or code level.

Still the problem continues revert back.

Regards,

Sankar

[Former Member]

Hi M Madhu,

Can u please guide me how can i acheive accumulation with formula??

If u are in india.. let me know some of ur details soo we can discuss this...

Thanks,

Abhay

[ameet_desai]

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

[deepa_khatri]

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

[ameet_desai]

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.

[Former Member]

Hi AVD,

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

[durgasankar_innamuri]

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

[durgasankar_innamuri]

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