Withholding Tax (Tax Deducted at Source)

TDS is termed in SAP with Withholding Tax(WHT). TDS is direct tax. The customer is responsible to
deduct TDS on below nature of incomes and remitted to the tax authorities.

Customer is liable to deduct tax from the vendor

On due date the collected Tax will be remitted to the tax authorities periodically.

On quarterly/half-yearly/yearly basis the organization will issue tax certificates to the vendors.(This
certificates consists of information on how much tax paid along with bank challan number)

On yearly basis the vendor will file the tax returns along with these certificates to the tax authorities.

TDS is calculated on:

1. Professional and Technical services

2. Income on Lease/Rental income
3. Income on Security deposits
4. Income on commission/brokerage etc.,

Configuration Settings on WHT

Step 1 - Create G/L Accounts FS00

100800 - TDS on professional Services

100801 - Education Cess

Step - Check Withholding Tax Countries

Path - SPRO  Financial Accounting (New)  Financial Accounting Global Settings (New) 
Withholding Tax  Extended Withholding Tax  Basic Settings  Check Withholding Tax Countries

New Entries
Save

Step - Define Withholding Tax Keys

Same Path

Country Key - IN

New Entries

Save

List of few TDS section codes:

TDS Section Codes Description

192A Salaries

193 Interest on Securities

Interest payment by banks,
194A Co-op. Societies or Post
Offices
Winnings from Lotteries /
194B
Puzzle / Game
Payment to Contractors/sub-
194C
contractors
 Payment of Insurance
194D
Commission
194H Commission or Brokerage
Rent of Land, Building or
194I(a)
Furniture
194I(b) Rent of Plant & Machinery

Step - Define Withholding Tax Type for Invoice Posting

Path - SPRO Financial Accounting  Financial Accounting Global Settings (New) 

Withholding Tax  Extended Withholding Tax  Calculation  Withholding Tax Type  Define
Withholding Tax Type for Invoice Posting

Country Key - IN

New Entries
Save

W/Tax Base Manual - If this indicator is set, system will allow the user to manually enter/edit WHT base
amount

Manual w/tax amount - If this indicator is set, system allows the user to enter WHT amount
manually.

No Certificate Numbering - If this indicator is set, system prevents certificate numbering.

Next Entry

Inherit Base - if this indicator is set, the tax of this tax type is dependent on another tax type

Ex: Education cess depends on other tax type like TDS on professional Services.

Note: we must maintain dependencies for the tax types set with Inherit base.
Save

Step - Define Withholding Tax Codes

Same path till Calculation  Withholding Tax Code  Define Withholding Tax Codes

Country Key - IN

New Entries

Next Entries
Save

Step - Portray Dependencies Between Withholding Tax Types

Same path till Calculation  Withholding Tax Base Amount  Portray Dependencies Between
Withholding Tax Types

Country Key - IN

Double click on Tax Type - W2

Here dependent type number 1 indicates withhld tax type W1.

Step - Define Min/Max Amounts for Withholding Tax Codes

Same path till Calculation  Minimum and Maximum Amounts  Define Min/Max Amounts for
Withholding Tax Codes

Country Key - IN

New Entries
Save

Step - Check Recipient Types

SPRO  FA New  FA Global Settings New  Withholding Tax  Extended Withholding Tax  Basic
Settings  Check Recipient Types

Country - IN
Step - Define Business Places

Same Path till Basic Settings  India  Define Business Places

Business Place represents TAN (Tax deduction account number) that organization has. The tax
authorities provides TAN number based on the place/location, where taxes are collected and remitted.

New Entries

Save

Step - Define Business place

Path - Cross-Application Components  General Application Functions  Nota fiscal  CNPJ
Business Places  Define Business Places

Company Code - Z100

New Entries

Save

Step - Assign Factory Calendars to Business Places

Same Path

New Entries

This setting determines, the tax payment due date based on the calendar. If payment date falls on
holiday, this controls tax to be remitted before/after the public holiday.

Save

Step - Maintain Tax Due Dates

Same Path

New Entries

Number Of Days After the tax Due Date - This field Specifies after how many days of posting
WHT, the tax to be remitted at tax office.

If maintained as 777, the due date of tax invoice will be set with 7th day from the month-end

Otherwise enter the number of days after which you have to remit the tax to the tax office.

Save

Step - Define Section Codes

Same Path

Company Code - Z100

Save

Step - Assign Withholding Tax Types to Company Codes

SPRO  Financial Accounting (New)  Financial Accounting Global Settings (New)  Withholding Tax
 Extended Withholding Tax  Company Code  Assign Withholding Tax Types to Company Codes

New Entries

Next Entry
Save

Step - Activate Extended Withholding Tax

Same path

Save

Step - Define Accounts for Withholding Tax to be Paid Over

SPRO  Financial Accounting (New)  Financial Accounting Global Settings (New)  Withholding Tax
 Extended Withholding Tax  Posting  Accounts for Withholding Tax  Define Accounts for
Withholding Tax to be Paid Over

Chart of Accounts - Z100

Save

Save

Step - Specify Document Type

SPRO  FA New  FA Global settings new  Withholding Tax  Extended Withholding Tax  Posting
 India  Journal Vouchers  Specify Document Type
Save

Step - Specify Document Type (Accounts Payable)

SPRO  FA New  FA Global settings new  Withholding Tax  Extended Withholding Tax  Posting
 India  Remittance Challans  Document Types  Specify Document Type (Accounts Payable)

New Entries

Save

Step - Maintain Number Groups

Same path

New Entries

Save
Step - Assign Number Ranges to Number Groups

Same Path

New Entries

Save

Step - Maintain Number Ranges

Choose Maintain Groups button

Place the cursor on group 01

Choose Create button

Save

Step - Maintain Number Groups and SAPscript Forms

Same path till postings  India  Withholding Tax Certificates for Vendors and Customers  Maintain
Number Groups and SAPscript Forms

New Entries

Save

Step - Assign Number Ranges to Number Groups

Same path

New Entries

Step - Maintain Number Ranges

Same path

Choose Maintain Group Button

- Cursor on Group 01
- Create button
- CoCd Z100

Save
 Testing of Withholding Tax configurations:

Step 1 - Assign Tax Code to Vendor Master XK02

Vendor -

Company Code -

- Select withholding tax check box

Enter
WH Tax Country

Save

Step - Post Vendor Invoice with TDS FB60

 Simulate

Save

Error - Missing PAN Number

Solution - Assign the user details in transaction OMT3E

- Double click on folder User screen reference

- New Entries
- Enter Login USER ID
- Save
Step - Change Vendor Master - XK02

- Choose Address Tab

- Select CIN Details Button
- Tab Withholding Tax
- Enter PAN no

Save

Error - Could not determine the year for TDS certificate number
range

Analysis : Tax settings missing for Company code

Path - SPRO  Logistics – General  Tax on Goods Movements  India  Basic Settings 
Maintain Company Code Settings
Save

Step - Post Vendor Invoice

Document 1900009 was posted in company code Z100

Step - Post Vendor Invoice

T-Code - FB60
Save

Document 1900010 was posted in company code Z100

Step - FAGLL03

F8
Step - Create Remittance Challan

Path - Accounting  Financial Accounting  Accounts Payable  Withholding Tax ,India 

Extended Withholding Tax  Remittance of Withholding Tax  Create Remittance Challan

T-Code - J1INCHLN

While remitting the collected taxes to the tax authorities, business must clear the WHT invoices by providing
respective bank clearing account.

System generates internal challan Number

Execute
To change bank amount from 1/-

Choose Document Overview Button

Double click on bank line item

Change the bank line item to 58710/-

-Choose Process Open Items

- Simulate
Save

Document 100004 was posted in company code Z100

Step - Enter Bank Challan

Same Path

T-Code - J1INBANK
After remittance of taxes at bank, the bank will issue challan number,

This step is used to assign the bank challan number to the internal challan number 2 created in the previous
step for reference.

Back arrow

Step - Print WHT Certificates

Path - Accounting  Financial Accounting  Accounts Payable  Withholding Tax ,India 
Extended Withholding Tax  Certificates  - Print

T-Code - J1INCERT