TDS India2016-17/User Documentation

Source of Information - http://www.incometaxindia.gov.in/,  https://www.tin-nsdl.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.

Installation

This module is installed once the Professional Version/Pack of the India Localization is installed.

Dataset Application

      This module provides 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 in 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, please follow the path- Financial Management -> India Localization ->TDS.

TDS Setup

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

Each Income Tax Officer is designated a specified area and specified categories of taxpayers. So the Income Tax Ward/Circle No/AO Code is the number that has been assigned to the Income Tax Assessing Officer who will be monitoring your Income Tax Return.

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.

Payment Parameters

Some Nature of Payments have different threshold limit for different transactions or on total of transactions during a financial year. This window allows the user to set these additional parameters. TDS Rates and Returns TDS Rate for Payment of Salary and Wages

Section 192 Payment of Salary and Wages Criterion of Deduction TDS is deducted if the estimated income of the employee is taxable. Employer must not deduct tax on non-taxable allowances like conveyance allowance, rent allowance, medical allowance and deductible investments under sections like 80C, 80CC, 80D, 80DD, 80DDB, 80E, 80GG and 80U. No tax is required to be deducted at source if the estimated total income of the employee is less than the minimum taxable income (Rs. 2,50,000/- in case of Individual, HUF, AOP, BOD and AJP. Nil for others.) TDS Rate As per Income Tax, Surcharge and Education Cess rates applicable on the estimated income of employee for the year. Section 192A Payment of accumulated balance of provident fund which is taxable in the hands of an employee (with effect from 01.06.2015). TDS Rate 10%

TDS Rates for Payments other than Salary and Wages to Residents (including domestic companies)

Section For Payment of On Payments Exceeding Individual/ HUF Others 193 Interest on Securities Rs. 5000/- 10% 10% 194 Dividend other than the dividend as referred to in Section 115-O - 10% 10% 194 A Income by way of interest other than 'Interest on securities' Rs. 10000/- 10% 10% 194 A Interest other than on securities by others Rs. 5000/- 10% 10% 194 B Winnings from Lotteries / Puzzle / Game Rs. 10000/- 30% 30% 194 BB Winnings from Horse Race Rs. 5000/- 30% 30% 194 C (1) Payment to Contractors Rs. 30000/- for single payment Rs. 75000/- for aggregate payment during Financial Year 1% 2% 194 C (2) Payment to Subcontractors / for Advertisements

194 D Payment of Insurance Commission Rs. 20000/- 10% 10% 194 EE Payment of NSS Deposits Rs. 2500/- 20% NA 194 F Repurchase of units by Mutual Funds / UTI Rs. 1000/- 20% 20% 194 G Commission on Sale of Lottery tickets Rs. 1000/- 10% 10% 194 H Commission or Brokerage Rs. 5000/- 10% 10% 194 I Rent of Land, Building or Furniture Rs. 180000/- 10% 10%

Rent of Plant & Machinery Rs. 180000/- 2% 2% 194 IA Transfer of Immovable Property (w.e.f. 01.06.2013) Rs. 50 lacs 1% 1% 194 J Professional / technical services, royalty Rs. 30000/- 10% 10% 194 J (1) Remuneration / commission to director of the company - 10% 10% 194 J (ba) Any remuneration / fees / commission paid to a director of a company, other than those on which tax is deductible u/s 192. - 10% 10% 194 L Compensation on acquisition of Capital Asset Rs. 100000/- 10% 10% 194 LA Compensation on acquisition of certain immovable property Rs. 200000/- 10% 10%

At present Openbravo India Localization Data Set includes TDS under section 194C, 194I, 194J.  The remaining rates can be created manually. This is explained later in the manual under “Configuration” section.

Notes:

1. No surcharge or education cess is deductible / collectible at source on payments made to residents {Individuals / HUF / Society / AOP / Firm / Domestic Company) on payment of incomes other than salary or wages. 2. TDS at higher rate of 20% or TDS rate, whichever is higher, has to be deducted if the deductee does not provide PAN to the deductor.(section 206AA).

                          All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain Tax Deduction or Tax Collection Account Number (TAN). TAN is a 10-digit alphanumeric number issued by the Income-tax Department.

Permanent Account Number (PAN) is a code that acts as an identification for Indian nationals, especially those who pay Income Tax. It is an unique, 10-character alpha-numeric identifier, issued by the Indian Income Tax Department under the supervision of the Central Board for Direct Taxes (CBDT) and it also serves as an important proof of identification.

PAN, TAN and Deductee type of a business partner can be mentioned in Partners Additional Fields tab in Business Partner Window.

TDS Challan In this window, an user is required to provide all the information needed to fill “TDS Challan" form. Challan type 281 is used for deposit of TDS/TCS. Challan type 280 is used for deposit of Advance Tax / Self-assessment Tax / Tax on Regular Assessment / Surtax / Tax on Distributed Profits of Domestic Companies / Tax on Distributed Income to Unit holders. Note: E-Payment: The challans can also be paid through e-Payment. This can be made by visiting www.tin-nsdl.com and going to “e-Payment of Taxes Online” From 01/04/2008, It is mandatory for deductors liable for audit under section 44AB in preceding FY to make all tax payments through e-Payment compulsorily. Government deductors can make the payment through Transfer Voucher to the treasury. Configuration TDS Setup 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.

To setup TDS, the user is required to perform these 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 where TDS transactions are taken place and “Income Tax Department” as business partner. Save the record.

General Ledger Items Setup

Along with business partners, we require General Ledger items which will be used for processing payments through TDS Challan. For each nature of payment, one G/L item is required, pointing to correct General Ledger accounts.

Ward/Circle Number

In this window, the user is required to provide the details with respect to deductor . Deductor means the “Organization” in Openbravo. To set up Ward/Circle Number, please follow these steps: Go to Application -> Financial Management -> India Localization -> TDS -> Ward/Circle Number or 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. Please refer this link- https://tin.tin.nsdl.com/pan/servlet/AOSearch?alpha=B&display=N&Category= to find out details of your area. Enter the the appropriate details in their respective fields as per the predefined set of jurisdictions. Save the record.

Multiple records can be entered as per the pre-defined jurisdictions.

Nature of Payment

Income Tax Department of India has specified different nature of payments along with Section Codes and TDS Rates. TDS Dataset provides some of the most commonly used ones. From the Financial year 2009-10, Surcharge, Education Cess and Higher Education Cess are not applicable on all types of TDS except TDS on Salary.

These steps are to be followed to create Nature of Payments Go to Application -> Financial Management -> India Localization -> TDS -> Nature of Payment or type "Nature of Payment" in the Quick Launch window. Enter the Nature of Payment, its Code and Section as defined by Income Tax Department, applicable for Current Financial year. For further details, please refer to http://www.incometaxindia.gov.in/Pages/charts-and-tables.aspx

Payment Parameters

Some Nature of Payments has 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 is applicable to all types of entities else only to the entity selected. Type of Legal entity can be                Individual/Proprietorship                Others                Registered Private Limited Company                Registered Public Limited Company                Registered Trust                Society/ Co operative Society Threshold Limit For Transaction : It indicates the limit if crossed for any single transaction, TDS will become applicable. Threshold Limit For Year : It indicates the limit if crossed for sum of all transactions occurred in a financial year, TDS will become applicable. Percentage Due : This TDS rate is applicable whenever the above threshold limit exceeds Effective from Date : This is the date from when the parameters entered apply.

In “Nature of Payment Account” tab, user needs to define Income Tax Account, Education Cess Account, and Surcharge Account etc.

Tax Category

Products and services will have different tax rates. A tax category allows grouping and managing similar product or services tax rates.

The same tax category can be assigned to more than one product or service. Every product and service must be linked to one tax category same as each tax rate. When a product or service is selected in an invoice, only the tax rate/s which belongs to that tax category will be used to get the applicable tax rate. Select applicable “Nature of Payment”.

Tax Rate

Tax rates are created in Tax rate window.

Below are the fields which are required to be filled in order to set a tax rate -

"Valid From Date"-The date from when a tax rate becomes valid. For an example, when rate of an existing tax rate  is increased   It is recommended to create a new tax rate configured with the new requirements, rather than changing the original tax rate which can be still in use if required. Therefore, there will be two tax rates which are exactly the same for a given organization except the rate (%) and the valid from date. "Tax Category"- Every tax rate must be linked to an applicable tax category to group similar tax rates. "Rate"- which is the % or rate of the tax "Sales/Purchase Type" - To differentiate if a tax is applicable on purchase / sales / both. "Country”- The name of the country where this tax is applicable. Select “India” from the drop down list. "Destination Country”- Select “India” “Region” -Once “India” is selected as Country, this field will show the list of states in India. Keep it blank while creating TDS Tax Rate as same TDS applicable all over India. “Destination Region”- Once “India” is selected as Country, this field will show the list of states in India. Keep it blank while creating TDS Tax Rate, as same TDS applicable all over India. "Summary Level"-This check box should be checked when a tax rate have some other rates below it. "Base Amount"- This is the base amount on which tax is getting calculated. The available options are- Line Net Amount Line Net Amount + Tax Amount Alternate Tax Base Amount Alternate Tax Base Amount + Tax Amount "Document Tax Amount Calculation" - This field implies how the tax amount is going to get calculated per each tax rate (or %). The options available are: Document based amount by rate Line base amount by rate"

“More Information” section contains few more relevant fields.

Parent Tax Rate- tax rates belonging to a summary tax rate should be linked to an applicable Child Tax rate. Business Partner Tax Category- A tax rate, that can be linked to a specific business partner Withholding- A tax rate can be set as "Withholding" therefore it is properly managed as a  separate tax type in the fiscal reports. Tax Exempt- A tax rate can be set as exempt. Not Taxable Deductible Not Deductible Cascade Indian Tax Category - “TDS” to be selected out of different Indian Tax types. Accounting Accounting tab allows to configure the account to be used while posting tax rate transactions to the general ledger. "Tax Due" is the account used while posting output tax liability amount. "Tax Credit" account is the account used while posting Input tax credit amount.

Usability

First create a purchase invoice which needs to have

A business partner A TDS rate related to the product/services included in the invoice.

Post the purchase invoice once completed.

In our example the total amount to pay to the supplier is INR 9,800 and the TDS to be paid to Income Tax department is INR 200. TDS amount gets automatically deducted from the invoice line net depending on the type of TDS structure defined for the product included in the purchase invoice.

In cases where the business partner does not have a PAN , please select “TDS without PAN” as the tax rate in the Lines section of the purchase invoice. Tax rate “TDS without PAN” can be created in the “Tax Rate” window.

TDS Challan

To create TDS challan, please follow below mentioned steps

Go to Application -> Financial Management -> India Localization -> TDS -> TDS Challan 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. In case any penalty or interest needs to be paid along with the Challan, manually enter that amount. Save the record.

After the record is saved, please follow these steps

Click on "Create Challan Detail records" button on the upper right hand side of the window. Once the button is clicked the Challan Details list is generated as shown below. Select the lines that needs to be processed along with the tax amount. Then click on the “Done” button.

Points to be noted

In the pop up, purchase invoices or G/L Journal which are related to the Nature of Payment selected in the first window, will appear. As for example, if Nature of Payment is “TDS-Rent on Land, Building or Furniture - 194 I” then only those purchase invoices or G/L Journal lines which have TDS - Rent on Land, Building or Furniture will appear in the pop up. TDS challan can be created irrespective of whether a purchase invoice is paid or not

After clicking on the “Done” button, these details will appear in the "TDS Challan Detail" tab.

Payment Date = The date when TDS is paid Challan Date = Challan Creation date

Payment of TDS

Every month depending on the transactions made, a TDS Challan Form needs to be created and submitted for each type of Nature of Payment for which purchase Invoices are created in that month. Click Payment Out for TDS Challan to process the payment record. Here the payment would be created based on G/L Items configured. TDS deducted in one month, needs to be deposited with the Income Tax Department by 7th of the following month.               For further details, please visit http://www.incometaxindia.gov.in/pages/deadline.aspx

Filing of TDS Returns

Challan type 281 can be printed and submitted to the bank directly from the TDS Challan window. User can manually fill up the TDS payment details, e.g. cheque number, Account No etc.

Every month there should be one Challan 281 for one type of TDS deducted corresponding to that particular month. As for example if TDS U/S 194 I (TDS on rent of Land, Building or Furniture) is deducted in July 2016, one Challan 281 of type 194 I (along with the amount of TDS deducted U/S 194 I) to be submitted to Income Tax Department within 7th August 2016.

Form 26Q

Form no 26Q is a quarterly TDS return to be filled in by deductor for all deductions made other than from Salary. In one Financial Year, this form can be generated for the period April-June, July-September, October-December and January-March. For details, please refer http://www.incometaxindia.gov.in/Pages/downloads/forms.aspx, https://www.tin-nsdl.com/download/oltas/Challan-No-ITNS-281.pdf.

To generate the Form 26Q, please follow this path :-

Application---->Financial Management---->India Localisation---->TDS---->Analysis Tools---->TDS Form 26Q or type TDS Form 26Q in the Quick Launch Window.

In the “TDS Form 26Q” pop up, select the followings Select the Organisation which is responsible for filling Form 26Q Starting Date - 1st Date of the quarter Ending Date - Last Date of the quarter Output Type - Select “Excel” from the drop down list

Points to be noted On Form 26Q

In Annexure - Deductee wise break-up of TDS -

Column No 420 and 428 will be blank

In SL No 4- Column  no. 409 will be blank. User can manually enter the data Column no. 413 will be blank

In Form 26Q, only those details will appear, TDS against which is paid to the Income Tax Department. In words, in TDS Challan window, if document status of a transaction is draft, that record will not appear in Form 26Q.

Form 24Q

Form 24Q is for TDS deducted on salary (under section 192) and is required to be submitted on a quarterly basis by the deductor. Form 24Q has details of salary paid and TDS deducted from employees. In one Financial Year, this form can be generated for the period April-June, July-September, October-December and January-March. For further details, please refer www.tin-nsdl.com/download/e-tds/24Q_01042015.pdf.

To generate the Form 24Q, please follow this path :-

Application---->Financial Management---->India Localisation---->TDS---->Analysis Tools---->TDS Form 24Q or type TDS Form 24Q in the Quick Launch Window.

In the “TDS Form 24Q” pop up, select the followings

Select the Organization which is responsible for filling Form 24Q Starting Date - 1st Date of the quarter Ending Date - Last Date of the quarter Output Type - Select “Excel” from the drop down list

Points to be noted On Form 24Q

In Annexure - Deductee wise break-up of TDS -

Column No 318 will be blank. User can manually enter the data Column No 326 will be blank

In SL No 4 - Column  no. 308 will be blank. User can manually enter the data Column no. 312 will be blank

At present Annexure II functionality is not available in Openbravo

In Form 24Q, only those details will appear, TDS against which is paid to the Income Tax Department. In words, in TDS Challan window, if document status of a transaction is draft, that record will not appear in Form 24Q.

'TDS Liability Report

It is a  report which will  have all the records, (generated during a period) TDS against which are not paid to the Income Tax Department. This report should not contain TDS paid records This report should cover all the TDS sections except TDS U/S 192 B This report will not include any records which are created through GL Journals. Examples- Salary

To generate TDS Liability Report, please follow this path :- Application---->Financial Management---->India Localisation---->TDS---->Analysis Tools---->TDS Liability Report or type TDS Liability Report in the Quick Launch Window.