TDS India/User Documentation
Source of Information - http://www.incometaxindia.gov.in/, https://www.tin-nsdl.com/ http://www.saraltds.com
Tax Deducted at Source (TDS) is a means of collecting income tax in India, under the Indian Income Tax Act, 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS). It has a great importance while conducting tax audits. Assesse is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to Income Tax Department, Government of India during the Quarter to which it relates.
This module requires India Professional Pack to be installed.
This module provides some commonly used Nature of Payment types in the form of reference data.
This reference data can be applied either at client level or at organization level as explained here : India TDS.
Content of the module
Once installed this module creates a new folder named "TDS" under India Localization menu.
To check the contents of the TDS sub-menu go to Financial Management -> India Localization ->TDS.
This window is used for setting up for making TDS (which is already deducted from various vendors) payment to Income Tax Department, Government of India.
Ward/Circle Number is a predefined set of jurisdiction codes which are put forth by the government to make TDS payments.
It consists of Area Code, Assessing Officer Code (AO Code), Range Code etc. as per the area in the state.
Nature of Payment
There are different rates of TDS depending on the nature of services, as declared in the Indian Income Tax Act, 1961. These rates are subject to change as per the amendment in the Act.
TDS Dataset provides some of the common Nature of Payments used. Additionally new nature of payment types can be added as required.
This window helps the user to set up relevant Nature of Payment types applicable to the organization.
This window allows the user to capture all the information required for filling in "TDS Challan" form.
As per Government of India, TDS Challan 281 is the form used to deposit Tax Deducted at Source/Tax Collected at Source (TDS/TCS) for Company and/or Non-Company.
Tax payers must fill up the TDS Challan 281 and should carry it along with the check or cash to be deposited at the Banks.
To setup TDS, perform the following steps:
- Go to Application -> Financial Management -> India Localization -> TDS -> TDS Setup or just type "TDS Setup" in the Quick Launch window.
- Click on New button to create a new record.
- Enter the Organization and the business partner in the respective fields so that TDS applies to that business partner.
- Save the record.
Multiple records for different Business Partners can be created so that TDS applies to those Business Partners.
G/L Items Setup
Along with business partners, we require g/l items which will be used for processing payments through TDS Challan. We can enter the g/l items (one required for each nature of payment).
Ward/Circle Number is a pre-defined set of jurisdiction codes which are put forth by the government to make the TDS payments.
In other words, it is a collection of all the areas in the states which are grouped together under and Area Code.
A Commissioner/Officer is appointed for a particular area code which falls under his jurisdiction. The TDS payee/payer reports to the Commissioner/Officer of his respective area code.
To set up Ward/Circle Number, please follow these steps:
- Go to Application -> Financial Management -> India Localization -> TDS -> Ward/Circle Number or just type "Ward/Circle Number" the in Quick Launch window.
- Create a new record by clicking the new button on the left side of the toolbar.
- The record consists of the fields Area Code, AO Type, Range Code, AO Number, Jurisdiction.
Refer to this file Codes for the details of your area.
- Enter the the appropriate details in their respective fields as per the Government's predefined set of jurisdictions.
- Save the record.
Multiple records can be entered one after the other as per the pre-defined jurisdictions.
Nature of Payment
Government of India has declared different Nature of Payment Types along with their Code and Section such as "Payment of contractors and sub-contractors".
TDS Dataset provides some of the most commonly used ones.
This screen helps the user to set up relevant Nature of Payment types applicable to the organization.
To create Nature of payments follow these steps:
- Go to Application -> Financial Management -> India Localization -> TDS -> Nature of Payment or just type "Nature of Payment" in the Quick Launch window.
- Enter the Nature of Payment, its Code and Section as defined by Government of India. For additional information please refer to this file challanitns-281
- Navigate to "Nature of Payment Account" tab to define different account such as "Income Tax", "Education Cess", "Surcharge", "Interest" and "Penalty" accounts.
Some Nature of Payments have different threshold limits for different transactions or threshold limits for the total of the transactions within a given financial year.
This tab allows the user to set up these additional parameters by filling in below listed data:
- Type of Legal Entity : If blank indicates that the threshold limits apply to all types of entities else only to the selected entity.
- Threshold Limit For Transaction : Indicates the limit for any transaction related to a given Nature of Payment and Legal Entity.
- Threshold Limit For Year : Indicates the limit for the total of all the transactions related to a given Nature of Payment within a financial year.
- Percentage Due : This rate is applied whenever above thresholds limits are exceeded.
- Effective from Date : that is the date from when the parameters entered apply.
Note : As of now these parameters are not considered for tax calculations.
Create a Purchase Invoice.
This purchase invoice should have:
- a business partner for which TDS has been setup
- and a TDS tax rate related to the product/services included in the invoice.
Book the Purchase Invoice after it is created.
In our example the total amount to pay to the supplier is 8.100,00 as the TDS amount to pay to the government is 900,00.
TDS amount gets automatically deducted from the invoice line depending upon type of TDS rate structure defined for the product.
In cases where the business partner does not have a PAN number, it would be taken form the business partner tax category, and 20% TDS would be deducted in above case.
To create TDS Challan please follow these steps.
- Go to Application -> Financial Management -> India Localization -> TDS -> TDS Challan or just type "TDS Challan" in the Quick Launch window.
- Create a new record by clicking on the New record button on the toolbar.
- Select the Organization, enter a Payment Date and a Challan Date as required.
- Drop down fields like "Type of Deductees", "Type of Payment", "Nature of Payment" that needs to be selected appropriately as required.
- Save the record.
After the record is saved, click on "Create Challan Detail records" button on the upper right side of the window.
Once the button is clicked the Challan details list is generated as shown below.
Those details are also shown in the "TDS Challan Detail" tab.
- Every month depending on the transactions made a TDS Challan form needs to be created and submitted for each Nature of Payment. (Nature of Payment for which purchase Invoices are created).
- Enter the appropriate details for Type of deductee, type of payment, nature of payment, payment method etc. Note: once the record is saved document number gets automatically populated.
- Click on Create Challan Detail Records button to add lines to the Challan. This pop up would show lines associated to nature of payment selected in the header.
- Select the lines that needs to be processed along with the tax amount.
- In case any penalty or interest needs to be paid along with the Challan, manually enter that amount.
- Click Payment Out for TDS Challan to process the payment record. Here the payment would be created based on business partner selected in TDS Setup screen and G/l Items configured.
Print out of ITNS 281 challan can be printed and submitted to the bank directly from the TDS Challan window.