Withholding tax Tan based exemption - down payment ( India)

[manoj_chauhan1]

Hi all ,

My client gets running bills from contractor and makes advance payment ( section 194C) . He wants to have Tan based exemption limits for TDS deductions . Client makes advance payments but does not use functionality of down payment clearing where TDS gets reversed .But for Tan based exemption it is necessary to reverse down payments so that Tan wise exemption limit is adjusted while reversing down payment . His issue is time gap between making down payment and reversing down payment . So monthly return gets adjusted which he is saying that income tax authorities may give objection . But Since SAP has given this functionality of down payment reversal how it is use in India. Is it okay if TDS on down payment reversal happen in subsequent months . What is the practice followed in India .

Is it possible to get warning message at the time of invoice or DP if the TAN based exemption limit is exhausted .

Regards

Manoj

[sanilbhandari · Accepted solution]

Hi

Your client should not have a problem, since the law says that tax should be paid on payment or invoice first. So if you have deducted TDS on Downpayment, you should remaining TDS only at the time of invoice and that is what down payment clearing takes care of.

You cannot get accumulated TDS notification at the time of invoice or down payment as a standard functionality. You should look for a custom development, looking at table WITH_ITEM and REGUPW tables. In WITH_ITEM, you should look for WT_ACCWT and WT_ACCWTA fields. When you post a document, function module FI_DOCUMENT_CHECK gets called up and WHT Line items are created. You should look at the place where this function module is called up to put up your custom message. Please debug and find out the logic for the custom development taking help from your ABAP Colleague

Thanks & Regards

Sanil Bhandari

[manoj_chauhan1 · Accepted solution]

Hi Sanil,

Thanks for your answer .

In TAn based TDS exemption , what is the correct business process .

1. make down paymnet

2. do down paymnet clearing with out any reference to invoice

3. Create Invoice in FI / or miro.

But in the above steps down payment is not getting tagged to any invoice . so F110 program will not pick up net .

If I do downpayment clearing with invoice then I am facing following issue .

Vendor exemption limit is Rs 200000 with lesser TDS tax 0.25 % rate . There was a down payment of Rs 200000 /- . So the business got TDS calculated at lower rate. Now there is a FI invoice of Rs 500000/- . System calculated TDS on higher rate ie 2% as 200000/- limit is over on invoice . Now when you clear downpayment with that invoice TDS at concessional rate gets reversed . With reversal business gets again 200000 limit but on FI inv of 500000 the business deductes TDS at higher rate . So is his correct ?

Regards

Manoj

[sanilbhandari · Accepted solution]

Hi Manoj

You need to do F-54 for clearing of downpayment with reference to the invoice. There after, you need to execute F.13 or F-44 for vendor account clearing. This should help you have the net amount picked up for F110. Regarding the other query for calculation of correct with holding tax, you should have accumulation active in with holding tax configuration. The below screen shot of the tax type and help note on accumulation functionality should help you understand the way it works.

Thanks & Regards

Sanil Bhandari

[manoj_chauhan1 · Accepted solution]

hi Sanil ,

SAP has said in its notes that

• The standard accumulation should be deactivated.

Do not activate the standard accumulation functionality in your withholding tax type if you are using TAN based accumulation. Set it as ‘No Accumulation’. Based on this I have following settings .

doc1.jpg

But you are saying some other settings . So which one is correct . At present settings is no accumulation . So I need to change to settings shown by you .

Regards

Manoj

[sanilbhandari · Accepted solution]

Hi

Could you provide the OSS Note No which you are looking at? As a general rule, you should clearly list out your analysis.

Regards

Sanil