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Tax deduction at source, Extended withholding tax-INDIA

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Basic settings
Check withholding tax countries

Country = IN
Withholding tax country = IN
Description = WHT for India
Save

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Calculation
Withholding tax type
Define withholding tax type for invoice posting

Country key = IN
New entries
Withholding tax type = R1
Description = 2% TDS on Gross
Select the radio button on 'Gross amount' and leave the rest of the settings and save this.

Click 'next entry' in application toolbar

Withholding tax type = R2
Description = 2% TDS on Surcharge
Select the radio button on 'Gross amount' and leave the rest of the settings and save this.

Click 'next entry' in application toolbar

Withholding tax type = R3
Description = 2% Education Cess
Select the radio button on 'Gross amount' and leave the rest of the settings and save this.

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Calculation
Withholding tax codes
Define withholding tax codes

Country = IN

New entries

Withholding tax type = R1
Withholding tax code =R(you are defining a code now R)
Description = TDS calculation
Percentage subject to tax = 100%(as you specified to calculate tax on Gross amount in earlier step 100% here is reasonable)
Posting indicator = 1(standard posting)
Withholding tax rate = 2%(2% will be calculated)
Enter and save

Click next entry

Withholding tax type = R2
Withholding tax code =R
Description = TDS surcharge
Percentage subject to tax = 2%(calculates surcharge on 2% of gross amount)
Posting indicator = 1(standard posting)
Withholding tax rate = 2%(2% will be calculated)
Enter and save

Click next entry

Withholding tax type = R3
Withholding tax code =R
Description = Education cess
Percentage subject to tax = 2%(calculates surcharge on 2% of gross amount)
Posting indicator = 1(standard posting)
Withholding tax rate = 2%(2% will be calculated)
Enter and save

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Calculation
Withholding tax codes
Define formulas for calculating withholding tax

Country = IN
New entries
Currency = INR, INR, INR
Withholding tax type = R1, R2, R3
Withholding tax code = R, R, R
Withholding country = In, IN, IN
Valid from = 01.04.2006, 01.04.2006, 01.04.2006
Save
Select the block R1 and click 'formulas for calculating withholding tax'

New entries

To base amount = 99999999999(so that it can calculate tax on the value even at high)
Withholding tax = 2(it means the percentage to calculate for R1)
Save

Come back
Select the block R2 and click 'formulas for calculating withholding tax'

New entries

To base amount = 99999999999
Withholding tax = 2
Save

Come back
Select the block R3 and click 'formulas for calculating withholding tax'

New entries

To base amount = 99999999999
Withholding tax = 2
Save

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Company code
Assign withholding tax types to company codes

Now assign these settings ti your company

New entries

Company code = RV
Withholding tax type = R1
Check in the box 'withholding tax agent' (on behalf of vendor we are liable to pay tax)
Valid from = 01.04.2006 to 31.3.2007
Save

Click next entry
Company code = RV
Withholding tax type = R2
Check in the box 'withholding tax agent' (on behalf of vendor we are liable to pay tax)
Valid from = 01.04.2006 to 31.3.2007
Save

Click next entry
Company code = RV
Withholding tax type = R3
Check in the box 'withholding tax agent' (on behalf of vendor we are liable to pay tax)
Valid from = 01.04.2006 to 31.3.2007
Save

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Company code
Activate extended withholding tax

Check on the box corresponding to your company code and save

SPRO
Logistics - General
Tax on goods movements
India
Basic settings
Maintain company code settings

Company code = your company code
CENVAT Document type = SA
UTI fi document type = SA
First month = April
Save

SPRO
Financial accounting
Financial accounting global settings
With holding tax
Extended withholding tax
Posting
Accounts for withholding tax
Define accounts for withholding tax to be paid over

Chart of accounts = your company chart of accounts

Check on all the 3 boxes and save

Withholding tax type = R1
Withholding tax code = R
Debit = TDS payable
Credit = TDS payable

Withholding tax type = R2
Withholding tax code = R
Debit = Surcharge payable
Credit = Surcharge payable

Withholding tax type = R1
Withholding tax code = R
Debit = Educess payable
Credit = Educess payable

Create 3 accounts with these names in Liabilities side. Check on Open items also even it is in balance sheet, so that we can be intimated by system that we are liable to pay tax afterwards. Remaining creation same as in General ledger creation

Save

Assign this to vendor accounts also

SAP menu
Accounting
Financial accounting
Accounts payable
Master records
Maintain centrally
XK01 - Change

Mention the vendor that he will be affected with these taxes. Check in the box 'withholding tax' and enter
Withholding tax country = IN
Withholding tax type = R1, R2, R3
Withholding tax code = R, R, R
Liable = Check, check, check(so that this vendor is liable to pay, instead we are paying)
Save

Now check your customization with an invoice posting in F-43.
40 = Purchases account
31 = Vendor account

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  1. Its just part of configuration, with this information can't post the invoice

  2. Guest

    Dear SAP professional and Expert

     I have to know configuration  on withhloding Tax 1. Suppose I am serivce to my Vendor. Total billidng on  service Rs. 1,00,000.00. I said to my vendor do not deduction TDS on Rs.1,00,000.00.  As per rule IT onces  cross the Rs 30,000.00 Vendor has liable to cut TDS . But I told to vendor do not cut TDS. How i will configuration in SAP

    Please guide me