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Purpose

There are various scenarios that exist with the down payment clearing process. So, this page aims to throw some light on some of the common scenarios that are followed and how this is taken care of in the system. The main idea here is to provide an understanding of the withholding tax (or TDS) that is to be considered at the end of the down payment clearing (DPC) process.

This also deals with legal changes such as TDS rate change and how the system takes care of such scenarios.

Kindly note that this is only for Country India localization.

Overview

Refer the help sap documentation regarding the need for down payment clearing. This example also helps in having a basic understanding about this functionality.

Before we delve into some of the scenarios, please ensure the configurations and information provided in KBA 2730653 are followed. 


Scenarios for Down payment Clearing Process:

 

Scenario 1:  Down payment and invoice with same amount and same  withholding tax rate

Down payment:

Amount: INR 10000

Withholding tax rate: 10%

 

Invoice:

Amount: INR 10000

Withholding tax rate: 10%

 

  

Down payment clearing:

This is a very simple scenario where TDS of INR 1000 was deducted during DP and INR 1000 was deducted during Invoice.

Hence during DPC, INR 1000 is cleared.

 

Scenario 2: Down payment with higher amount compared to invoice and same rate

Down payment:

Amount: INR 10000

Withholding tax rate: 10%

 

Invoice:

Amount: INR 7500

Withholding tax rate: 10%


Down payment clearing:

In this case, down payment was performed for INR 10000 where TDS of INR 1000 was deducted. However, an invoice for only INR 7500 was posted where TDS of INR 750 was deducted. Here, despite the invoice being of a lower amount, the TDS that should be paid at the end of the DPC process is the TDS that was deducted during down payment posting. Hence as per this example, a TDS of INR 1000 is to be paid.

 

Scenario 3: Single invoice, multiple down payments with same tax rate

Down payment 1:

Amount: INR 10000

Withholding tax rate: 10%

 

Down payment 2:

Amount: INR 3000

Withholding tax rate: 10%

 

Invoice:

Amount: INR 13000

Withholding tax rate: 10%

 

Down payment clearing:

This case deals with multiple down payments and single invoice. Since TDS of INR 1300 was calculated in both down payment and invoice, at the end of the DPC cycle, the TDS of INR 1300 is to be paid.


Scenario 4: Down payment posted with higher rate and invoice posted with lower rate – Same amount

Down payment:

Amount: INR 10000

Withholding tax rate: 10%

 

Invoice:

Amount: INR 10000

Withholding tax rate: 7.5%

 


Down payment clearing:

There are certain cases where there is a difference in the withholding tax rate between down payment and invoice postings.

Eg: On 13th May 2020, there was a reduction of 25% on the existing withholding tax rate wef 14th May 2020 up to 31st March 2021.

As per this example, consider a down payment posted on 12th May with 10% and Invoice posted on 20th May with 7.5% (due to the revised rate of 25% reduction). Since the down payment was posted with 10% rate, this rate should be considered at the end of the DPC cycle.

So, as per this example, the final TDS to be paid is INR 1000.

 

Scenario 5: Down payment posted with lower rate and invoice posted with higher rate – Same amount

Down payment:

Amount: INR 10000

Withholding tax rate: 7.5%

 

Invoice:

Amount: INR 10000

Withholding tax rate: 10%


Down payment clearing:

This scenario is similar to scenario 4.

To cite the same example, If the withholding tax rate is 10% which has been reduced to 7.5% (due to 25% reduction) from 14th May 2020 to 31st March 2021 and thereafter from 1st April 2021, the rate will change back to 10%. 

Consider a down payment posted on 27th March 2021 with 7.5% rate and invoice posted on 3rd April 2021 with 10% rate. In this case, since the down payment was posted with 7.5% rate, this rate should be considered while paying TDS at the end of the DPC cycle.

So, as per this example, the final TDS to be paid is INR 750.

 

Scenario 6: 1st Down payment posted with higher rate, 2nd down payment and invoice posted with lower rate

1st Down payment:

Amount: INR 10000

Withholding tax rate: 10%

 

2nd Down payment:

Amount: INR 10000

Withholding tax rate: 7.5%

 

Invoice:

Amount: INR 20000

Withholding tax rate: 7.5%

 

Down payment clearing:

Let's complicate scenario 4 a little by also including multiple down payments against single invoice.

Here, the 1st down payment was posted with 10% rate (say on 12th May 2020) and after the withholding tax rate was changed, (say on 20th May 2020) both the 2nd down payment and the invoice were posted with a rate of 7.5%.

In this case, since the down payments were posted with 7.5% and 10% rate, these rates should be considered while paying TDS at the end of the DPC process.

So, as per this example, the final TDS to be paid is INR 1750.


Related SAP Notes/KBAs


2730653 - TDS not calculated on posting Down payment Clearing document


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