Withholding Tax Rates

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2013-14, Withholding Tax RatesLeave a comment
BASIC SETTINGS- EXTENDED
WITHHOLDING TAX
Posted on March 8, 2013 by Jayanth Maydipalle
Task-1 Check Withholding Tax Countries

IMG ⇒ Financial Accounting ⇒Financial Accounting Global Settings ⇒Withholding

Tax ⇒Extended Withholding Tax ⇒Basic Settings ⇒Check Withholding Tax Countries

The withholding tax country is needed for printing the withholding tax form. Since the list of
country IDs prescribed by law is different from the list in the system, you have to define the
withholding tax countries again.

Task-2 Define Official Withholding Tax Codes

IMG ⇒Financial accounting ⇒Financial Accounting Global Settings ⇒Withholding

Tax ⇒Extended Withholding Tax ⇒Basic Settings ⇒Define Official Withholding Tax
Codes

If your national tax authorities use withholding tax keys to identify the different withholding
tax types, you can define these official names for your tax   codes here.

192     ⇒   TDS on Salaries

194C   ⇒   TDS on Contractors

193     ⇒   TDS on Interest on Securities

194I    ⇒   TDS on Rent

194J   ⇒   TDS on Professional Services

Task-3 Define Reasons for Exemption

IMG ⇒Financial accounting ⇒Financial Accounting Global Settings ⇒Withholding

Tax ⇒Extended Withholding Tax ⇒Basic Settings ⇒Define Reasons for Exemption

Here we define reasons for exemption from withholding tax. This indicator can be entered in
the vendor master record or in the company code Withholding Tax master record
information.
Task-4  Check Recipient Types

IMG ⇒Financial accounting ⇒Financial Accounting Global Settings ⇒Withholding

Tax ⇒Extended Withholding Tax ⇒Basic Settings ⇒Check Recipient Types

The type of recipient categorizes the vendor, which is necessary for printing the withholding
tax form.

Task-5 Define Business Places

IMG ⇒Financial accounting ⇒Financial Accounting Global Settings ⇒Withholding

Tax ⇒Extended Withholding Tax ⇒Basic Settings ⇒India ⇒Define Business Places

Create a business place for each tax deduction account number (TAN) that your company
has. In the address data (which is printed on the vendor withholding tax certificates) maintain
the tax office’s address

Tagged Check Recipient Types, Check Withholding Tax Countries, Define Business

Places, Define Official Withholding Tax Codes, Define Reasons for ExemptionLeave a
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TDS OVERVIEW AND PROCESS
Posted on March 8, 2013 by Jayanth Maydipalle
OVERVIEW OF TDS
Tax deducted at source (TDS) is a tax that is deducted from income that a company in India
pays to a recipient or supplier if the income amount exceeds a specific statutory limit in a
financial year.

The types of income that are subject to TDS include:

 Salary.
 Interest and dividends.
 Winnings from the lottery.
 Insurance commission.
 Rent.
 Fees from professional and technical services.
 Payments to contractors and subcontractors.
The withholding amounts for TDS can be deducted from an invoice submitted by a supplier
or from the payment that is issued to the recipient or supplier. Examples of recipients and
suppliers include contractors, providers of professional services, employees, and real estate
landlords. Companies submit a TDS certificate to each supplier on a monthly or yearly basis.
The certificate includes the payments, as well as information about the company and supplier.
Companies must also submit an annual return to the government for each recipient or supplier
for the financial year. TDS certificate can be either Form 16 (R75I10A) or Form 26Q-P2P-
IND (R75I122EQ). Form 16 is the TDS certificate which an individual submits and Form
26Q is the TDS certificate which a company submits to the tax authorities.
TDS must also be deducted from payments issued to third parties by both corporate and
noncorporate entities. The entity must deposit the amount owed for withholding at any of the
designated branches of banks that are authorized to collect taxes on behalf of the government
of India. The entity must also submit the TDS returns, which contain details about the
payments and the challan for the tax deposited to the Income Tax Department (ITD).

For electronic TDS, companies must generate the Form 26Q for each financial quarter. This
is a statutory requirement for the ITD.

Process of TDS :
Or

TDS/Withholding Tax Rates:

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WITHHOLDING TAX CONFIGURATION

PDF FILE
The Withholding Tax configuration enables the system to calculate and report TDS in India.
The standard functionality is mainly used in withholding of tax from vendor invoices and
depositing the same with the tax authorities.
The basic withholding tax settings for India (Country India Version) will include the
following sub processes which are commonly used within the main process.
  Defining withholding tax keys
 Defining branch offices (Section codes)
 Defining withholding tax type invoice & payment posting
 Defining withholding tax type for ECESS at Invoice posting
 Maintaining surcharges
 Defining withholding tax codes
 Defining GL accounts to post the withholding tax
 Maintenance of number ranges for tax certificates and Challan
please click on the bellow mentioned Link

Withholding Tax Configuration

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CONFIGURE EXTENDED WITHHOLDING TAX
Posted on January 12, 2013 by Jayanth Maydipalle
SAP system provides two procedures for processing withholding tax; the “Standard” and the
“Extended” withholding tax. We’ll walk you through on the basic configuration steps of the
latter procedure.

1. First, Check Withholding Tax Countries:

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Basic Settings → Check Withholding
Tax Countries.

The “Change View Country Key for Withholding Tax: Overview” screen appears. To create
new entry, you may copy an existing country key by selecting the Copy button or you may
create from scratch by selecting New Entries button.

Fill up the following fields:

 Country Key (Cty) – e.g. PH

 Withholding Country Key (WCty) – e.g. PH
 Description – e.g. Withholding Tax – Philippines
2. Second, Define Withholding Tax Keys. These are codes use to identify the different
withholding tax types of each country.

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Basic Settings → Define Withholding
Tax Keys.

A pop-up window “Determine Work Area: Entry” appears. Enter your country code, e.g.
‘PH’. Then select Enter button or press Enter on your keyboard.
The “Change View Official Withholding Tax Key – Descriptions: Overview” screen appears.
To create new entries you may copy an existing tax key by selecting Copy button or you may
create from scratch by selecting New Entries button.

Fill up the following fields:

 Official Withholding Tax Key (Off. Key) – e.g. ‘C010′.

 Text 40 (Name) – Professional talent fee paid to juridical person <=720,000.
3. Third, Define Withholding Tax Type. Note that with “Extended Withholding Tax
Procedure”, withholding tax can be computed by the system during invoice processing or
during posting of payments. Furthermore, the withholding tax on partial payments can also be
computed or determined by the system automatically.

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Calculation → Withholding Tax Type
→ Define Withholding Tax for Invoice Posting (or for Payment Posting).

A pop-up window “Determine Work Area: Entry” appears. Enter your country code, e.g.
‘PH’. Then select Enter button or press Enter on your keyboard.

The “Change View Define Withholding tax type: Posting at time of invoice” screen appears.
On the said screen, you may create through copy an existing tax type or you may create from
scratch. Select the Copy button or New Entries button.

Fill up the Withholding Tax Type and Description fields. All other fields are already standard
and more or less fit to your withholding tax requirements in your country.

4. Fourth, Define Withholding Tax Code. The tax code you create in this step should be
assigned to the withholding tax type and withholding tax key created from the preceding
steps. Furthermore, you enter also the tax rate and the base amount of computation.

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Calculation → Withholding Tax Code
→ Define Withholding Tax Code

A pop-up window “Determine Work Area: Entry” appears. Enter your country code, e.g.
‘PH’. Then select Enter button or press Enter on your keyboard.

The “Change View Withholding tax code: Details” screen appears. You may copy an existing
tax code or you may create from scratch.

Fill up the following fields:

 Withholding tax type – assign a withholding tax type you’ve created in step 3.
 Withholding tax code – create your withholding tax code.
 Description – Enter description of your withholding tax code.
  Official Withholding tax key – assign a withholding tax key you’ve created in step 2.
 Percentage subject to tax (Base amount) – normally, 100% of the base amount is
subject to tax.
 Posting indicator – normally select ’1′ which means, there is one line item entry for
the withholding tax and the amount is deducted fromt the line item of customer,
vendor, or cash account.
 Withholding tax rate – enter the tax rate of the tax code. This will use by the system to
compute the amount of tax during processing.
5. Fifth, Assign Withholding Tax Types to Company Codes. Here, you assign the
withholding tax types created in step 3 to your Company Code.

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Company Code → Assign Withholding
tax type to Company Code.

The “Change View Withholding tax information for company code per w/tax type” screen
appears. You may copy an existing company code assignment or you may assign from
scratch.

6. Sixth, Activate Extended Withholding Tax for your Company Code. Remember, the
activation of this tax procedure is on the company code level. You can’t use this tax
procedure to your company code, unless activated.

Path: IMG → Financial Accounting (New) → Financial Accounting Global Settings (New)
→  Withholding Tax → Extended Withholding Tax → Company Code → Activate Extended
Withholding Tax.

The “Change View Enhanced withholding tax functions active: Overview” screen appears.
To activate, tick the check box “Ext. w/tax” of your company code.

7. Finally, Define G/L Accounts for Withholding Tax. In this step, you assign the G/L
account for Withholding tax posting.

Path: IMG → 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.

A pop-up window “Enter Chart of Accounts” appears. Enter the Chart of Accounts code then
select Enter button or press Enter on your keyboard.

The “Maintain FI Configuration: Automatic Posting – Accounts” screen appears. Select the
G/L account you want to assign for withholding tax postings.

Note, for every step above don’t forget to save your work. Select Save button or Ctrl+S after
each step.

Tagged Extended Withholding Tax3 Comments

EXTENDED WITHHOLDING TAX
Posted on September 27, 2012 by Jayanth Maydipalle
EWT: TDS Overview

EWT: TDS (Tax Deducted at Source)

 Tax is deducted at source from all payments/provisions which are hit by the TDS
provisions of the Act
 Some of the above payments/provisions pertain to services that come within the scope
of Tax Deducted at Source (‘TDS’) under the Indian Income-tax Act, 1961 (‘Act’).
 Tax is not deducted from payment for goods
 TDS is required to be deducted at the time of payment or invoice posting whichever is
earlier.
 The taxes which are so deducted, will then have to be deposited to the credit of the
Indian Government on or before 7th of next every month.
 The company will have to issue TDS certificates to the vendors for the tax deducted
and also file with the tax office, Quarterly & Annual Return‘ of the total taxes
deducted during the year under the various sections of the Act. 
EWT: Vendor TDS:
EWT: Vendor Transactions:
EWT: Customer Interest TDS:
EWT: Provisions and Adjustments:

 TDS computed on entries in provisional liability accounts (GR/IR and SR/IR

Accounts)
 TDS is computed at each period end on uncleared entries remaining in the GR/IR and
SR/IR accounts
 GR/IR and SR/IR accounts relevant for computing TDS on provisions identified
separately
 GL accounts to which the provisional TDS is posted identified and document Type
used for provisional TDS postings is separately identified
 JV facility available for carrying out changes to TDS relevant postings
 Accounts to which losses (non-recoverable TDS) is to be posted and the document
type to be used for TDS adjustment postings is  identified separately.
EWT Activities:
TDS:

Due Date for monthly TDS rETURN : 7TH of everymonth

TDS on Salaries-192B
TDS on Contractors-194C
TDS ON Rent- 194I
TDS on Professional Fees- 194 J

TDS Querterly Returns:

1st Q-Apr to June- Due date-15th of July

2nd Q- July to Sept- Due Date- 15 Th of Oct
3rd Q- Oct to Dec- Due Date- 15th of Jan
4th Q- Jan to Mar- Due Date 15 Th June

Quartly Returns:
24Q for salaries
27Q for other than salaries
Contracts (including work land labour contract) – 194 c The tax has to be deducted @
2% on contract payments and 1% for subcontract and advertisement contract payments. The
tax is required to be deducted if a single payment exceeds Rs. 20000/– or if the aggregate
payments exceed Rs. 50000/– per annum.

Rent- 194 i Any amount paid as rent above Rs. 120000/- per year will attract TDS
provisions @ 10% for Individual & HUF and 20% for others.

Fees for professional or technical services/royalty/Income on units of mutual funds: 194 j

The tax has to be deducted @10% with some basic exemption limits.

Interest on securities/Dividends/Interest/Insurance commission-:193, 194, 194A&

194D The tax has to be deducted @ 20% for domestic companies and 10% for others with
some basic exemption limits, in the case of interest if the amount of interest is up to
Rs. 5000/– during a financial year. however, in the case of interest paid by a banking
company, Co-operative society engaged in the business of banking and a public company
engaged in the financing or construction of residential houses in India, this limit is
Rs. 10000/-.

Insurance commission-: Any person responsible for paying to a resident any remuneration

or reward whether by way of commission or otherwise, for procuring insurance business is
required to deduct tax @ 20% for companies and 10% for other person if the amount credited
or paid is more than Rs. 5000/- in a financial year