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Record TDS Transactions

Record TDS Transactions

You can record the required TDS transactions as per your business needs.

Account for Expenses and Deduct TDS Later

Generally, the deductor deducts the tax in the same invoice in which the expenses are accounted. But in some cases, deductor may follow the procedure of accounting only expenses on the receipt of bills and later, deduct applicable tax on all such accounted expenses in one invoice.

In this section

 

Accounting for Expenses

  1.  Gateway of Tally > Vouchers > press F7 (Journal)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the expense ledger and enter the amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  3. Credit the party ledger and enter the amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  4. Accept the screen. As always, you can press Ctrl+A to save.

 

Deduct Applicable TDS

  1. Gateway of Tally > Vouchers > press F7 (Journal)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the party ledger and enter the TDS amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  3. Enter the required details in the Bill-wise Details screen.
  4. Press Enter.
  5. Credit the TDS ledger and enter the amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  6. Enter the required details in the TDS Details screen.

    The Journal voucher appears as shown below:
  7. Accept the screen. As always, you can press Ctrl+A to save.

 

Purchase of Software

You can create the nature of payment and record the transaction.

In this section

 

Nature of payment for taxable purchase of software product

  1. Gateway of Tally > Create > type or select TDS Nature of Payments > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > TDS Nature of Payments > and press Enter.
  2. Enter the Name of the nature of payment.
  3. Enter 194J and 94J in the fields Section and Payment Code, respectively.
  4. Set the option Is software royalty to Yes.
    In the TCS Nature of Payment Creation screen, press F12 (Configure) > set the option Allow Software Royalty to Yes. to get the field Is software royalty
  5. Enter the Rate of tax.
  6. Enter the amount up to which tax is not applicable for this category, in the field Threshold/exemption limit, if any.
  7. Accept the screen. As always, you can press Ctrl+A to save.

 

Taxable purchase of software products

  1. Gateway of Tally > Vouchers > press F9 (Purchase)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F9 (Purchase).
  2. Press Ctrl+H (Change Mode) to select the required voucher mode (Accounting Invoice, in this case).
  3. Press F12 (Configure).
    • Set the option Modify tax details for TDS to Yes.
    • Press Ctrl+A to accept.
  4. Enter the Supplier Invoice No. and Date.
  5. Select the ledger of the supplier in the field Party A/c name.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  6. Select the ledger, created under Purchase Accounts, under Particulars, and enter the Amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  7. Press Enter. The Expense Allocation screen appears.
  8. Select the nature of payment applicable for taxable purchase of software product and press Enter.
  9. Select TDS tax ledger under Particulars. The TDS tax amount automatically appears, based on the rate of tax defined in the nature of payment.
  10. Accept the screen. As always, you can press Ctrl+A to save.

Note: In this case, the purchase ledger and TDS ledger are created without selecting a Nature of Payment in the master. The nature of payment is selected during transacting. You can also create ledgers by selecting the respective nature of payment.

 

Nature of payment for the exempt purchase of software product

  1. Gateway of Tally > Create > type or select TDS Nature of Payments > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > TDS Nature of Payments > and press Enter.
  2. Enter the Name of the nature of payment.
  3. Enter 194J and 94J in the fields Section and Payment Code, respectively.
  4. Set the option Is software royalty to Yes.
  5. Enter the Rate of tax as 0%.
  6. Set the option Is zero rated to Yes.
  7. Enter the amount up to which tax should not be applied for this category in the field Threshold/exemption limit, if any.
  8. Accept the screen. As always, you can press Ctrl+A to save.

 

Zero-Rated purchase of software product

  1. Gateway of Tally > Vouchers > press F9 (Purchase).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F9 (Purchase).
  2. Press Ctrl+H (Change Mode) to select the required voucher mode (Accounting Invoice, in this case).
  3. Press F12 (Configure).
    • Set the option Modify tax details for TDS to Yes.
    • Press Ctrl+A to accept.
  4. Enter the Supplier Invoice No. and Date.
  5. Select the ledger of the supplier in the field Party A/c name.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  6. Select the ledger, created under Purchase Accounts, under Particulars, and enter the Amount.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  7. Press Enter. The Expense Allocation screen appears.
  8. Select the nature of payment applicable for zero rated purchase of software product and press Enter.
  9. Press Enter.
  10. Accept the screen. As always, you can press Ctrl+A to save.

The value from both taxable and zero-rated/exempt transactions will be updated in Form 26Q. However, in the returns file, the value from exempt transaction is flagged with the initial S, indicating software purchase.

 

Reversal of Expenses with TDS

You can record any reversal of expenses with the applicable TDS using a purchase voucher.

In this section

 

Purchase voucher

  1. Gateway of Tally > Vouchers > press F9 (Purchase)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F9 (Purchase).
  2. Enter the Supplier Invoice No. and Date.
  3. Select the Party A/c name.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  4. Under Particulars, select the expense ledger and enter the amount.
  5. Select the TDS ledger. The amount appears automatically.
  6. Enter the Bill-wise Details.
  7. Accept the screen. As always, you can press Ctrl+A to save.

 

Debit Note

To Enable Debit Note Voucher Type

  1. Gateway of Tally > Alter > type or select Voucher Type > Debit Note > and press Enter.
    Alternatively, press Alt+G (Go To) > Alter Master > Debit Note > and press Enter.
  2. Set Activate this Voucher Type to Yes.
  3. Accept the screen. As always, you can press Ctrl+A to save.

 

Debit Note Voucher

  1. Gateway of Tally > Vouchers > press Alt+F5 (Debit Note).
    Alternatively, press Alt+G (Go To) > Create Voucher > press Alt+F5 (Debit Note).
  2. Enter the Original Invoice No. and Original Invoice Dt.
  3. Select the Party A/c name.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  4. Select the expense ledger and enter the amount.
  5. Select the TDS ledger.
  6. Enter the details in the TDS Details screen.
  7. Enter the details in the Bill-wise Details screen and press Ctrl+A to save.
  8. Accept the screen. As always, you can press Ctrl+A to save.

 

Deduct Tax at Lower Rate

To record a transaction attracting a lower rate with applicable TDS can be recorded by using the commission expense ledger.

The Assessing Officer shall issue a certificate for deduction of Tax at Lower rate than the relevant rate specified under the section, Where the assessing officer is satisfied that the total income of the recipient (Assessee) justifies the deduction of income tax at any lower rates than the rate specified under the sections specified under the act and has received an application in Form 13 from the assessee under sub-section (1) of section 197.

The certificate granted shall be valid for the assessment year specified and is valid only for the person named therein.

  1. Gateway of Tally > Vouchers > press F7 (Journal).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the expense ledger and enter the amount.
  3. Credit the party ledger (ensure you have selected Section Number 197 in the party ledger). The amount after TDS deduction will appear in the Amount field automatically.
  4. Enter the Bill-wise Details, as required.
  5. Credit the TDS ledger. The amount will appear automatically.
  6. Accept the screen. As always, you can press Ctrl+A to save.

 

Deduct Tax at Zero Rate

A Deductee (other than Company or Firm) can submit a declaration in Form 15G under sub section (1) of section 197A, for TDS deduction at Zero Rate. Declarations can be given only by those deductees whose income is below the taxable limit and the income falls under section 193, 194, 194A, 194EE and 194K.

The certificate granted shall be valid for the assessment year specified and is valid only for the person named therein.

  1. Gateway of Tally > Vouchers > press F7 (Journal).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the expense ledger and enter the amount.
  3. Credit the party ledger (ensure you have selected Section Number 197A in the party ledger).
  4. Enter the Bill-wise Details, as required and press Ctrl+A to save.
  5. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS on Expenses with Inventory

You can create an accounting voucher for expenses made towards inventory, along with the applicable TDS.

  1. Gateway of Tally > Vouchers > press F9 (Purchase)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F9 (Purchase).
  2. Press Ctrl+H (Change Mode) to select the required voucher mode (Item Invoice, in this case).
  3. Enter the Supplier Invoice No. and Date.
  4. Select the Party A/c name.
  5. Select the Purchase ledger.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Stock Items > press Enter.
  6. Select the stock item enter the Quantity and Rate. The amount appears automatically.
  7. Select the TDS ledger. The amount appears automatically.
  8. Enter the required details in the Bill-wise Details screen and press Ctrl+A to save.
  9. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS Deduction for Interest Payable

When transaction is recorded for payment or booking of the interest (expense) without deducting TDS, a separate transaction is recorded to deduct TDS for this interest amount. However, the transaction recorded for TDS deduction should be linked to the transaction recorded for interest amount. You can link these transactions by flagging the interest paid transaction as an exception. Additionally, you can use the voucher class feature to help you automatically calculate the interest amount and the TDS amount on the interest.

  1. Press F11 (Features) > set Enable Interest Calculation to Yes.
  2. If you do not see this option:
    •  Set Show more features to Yes.
    •  Set Show all features to Yes.
  3. Create a credit note voucher class to enable automatic calculation of interest in the voucher.
    1. Gateway of Tally > Alter > type or select Voucher Type > Credit Note > and press Enter.
      Alternatively, press Alt+G (Go To) > Alter Master > Credit Note > and press Enter.
    2. Enter Name of Class and press Enter.
    3. Set the option Use Class for Interest Accounting to Yes.
  4. Create the party master and set the option Activate interest calculation to Yes.
    • Enter the PAN details, as they are mandatory for TDS transactions.
  5. Set the options Calculate Interest Transaction-by-Transaction and Override Parameters for each Transaction to Yes.
  6. Create the Nature of payment.
    • Gateway of Tally > Create > type or select TDS Nature of Payments > and press Enter.
      Alternatively, press Alt+G (Go To) > Create Master > TDS Nature of Payments > and press Enter.
  7. Create TDS ledger and expense ledger. Select the same Nature of payment in both the ledgers.
    • Gateway of Tally > Create > type or select Ledger > and press Enter.
      Alternatively, press Alt+G (Go To) > Create Master > Ledger > and press Enter.

  8. Create a receipt or journal voucher to record the payment from the party, or to record the receipt of loan from the party.
    • Gateway of Tally > Vouchers > press F6 (Receipt).
      Alternatively, press Alt+G (Go To) > Create Voucher > press F6 (Receipt).
  9. Create a credit note using the voucher class that was created to account for the interest payable.
  10. Resolve the exceptions of the credit note transaction in the TDS report.
    • Gateway of  Tally > Display More Reports > Statutory Reports >  TDS Reports > Form 26Q.
      Alternatively, press Alt+G (Go To) > type or select Form 26Q > and press Enter.
      The credit note will appear under No link is available in booking and booking with deduction voucher.
    • Press Alt+L (Link All) to clear the exceptions.

  11. Create a TDS deduction journal voucher. Link the TDS deduction transaction to the credit note using the TDS reference generated while resolving the exception:
    • Gateway of Tally > Vouchers > press F7 (Journal).
      Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
    • Press Ctrl+F (Autofill).
  12. The values will be automatically displayed in the voucher.
  13. Accept the voucher to save the details.
  14.  Create a payment voucher to record payments made to the party. You can record payments of only the interest amount or both the principal and the interest amount.
    • Gateway of Tally > Vouchers > press F5 (Payment).
      Alternatively, press Alt+G (Go To) > Create Voucher > press F5 (Payment).
    • Select the bill reference as Agst Ref and choose the required bill.

 

TDS on Advance Payment

You can create an accounting voucher for advance payments made directly or by a third-party, along with the applicable TDS.

In this section

 

Advance payment with TDS

  1. Gateway of Tally > Vouchers > press F5 (Payment).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F5 (Payment).
  2. Select the bank ledger in the Account field.
    As always, press Alt+C, to create a master on the fly. Alternatively, press Alt+G (Go To) > Create Master > type or select Ledger > press Enter.
  3. Under Particulars, select the party ledger and enter the amount.
  4. Select the TDS ledger. The amount appears automatically.
  5. Enter the Bank Allocation Details, as required.
  6. Accept the screen. As always, you can press Ctrl+A to save.

 

Advance payment via third party with TDS

  1. Gateway of Tally > Vouchers > press F7 (Journal).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the party ledger and enter the amount.
  3. Credit the third party ledger and enter the amount.
  4. Select the TDS tax ledger. The amount appears automatically.
  5. Enter the TDS Details, as required.
  6. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS on Expenses

You can create an accounting voucher for your business expenses, along with the applicable TDS.

  1. Gateway of Tally > Vouchers > press F7 (Journal).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the expense ledger and enter the amount.
  3. Credit the party ledger. The amount after TDS deduction will appear automatically.
  4. Enter the Bill-wise Details, as required, and press Ctrl+A to save.
  5. Credit the TDS ledger. The TDS amount will appear automatically.
  6. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS on Fixed Assets

You can create an accounting voucher for expenses made towards fixed assets, along with the applicable TDS.

  1. Gateway of Tally > Vouchers > press F7 (Journal)
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the fixed asset ledger and enter the amount.
  3. Credit the party ledger and the amount is automatically filled.
  4. Enter the required details in the Bill-wise Details screen.
  5. Credit the TDS ledger. The amount appears automatically.
  6. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS on Interest Paid Towards Overdue Payments

The following chain of transactions will help you deduct TDS against interest payable/paid on overdue payments to suppliers/parties.

In this section

 

Activate interest calculation

  1. Press F11 (Features) > set Enable Interest Calculation to Yes.
    If you do not see this option:
    •  Set Show more features to Yes.
    •  Set Show all features to Yes.
  2. Accept the screen. As always, you can press Ctrl+A to save.

 

Define interest parameters in party ledger

  1. Gateway of Tally > Alter > type or select Ledger > and press Enter.
    Alternatively, press Alt+G (Go To) > Alter Master > Ledger > select the party ledger and press Enter.
  2. Set the option Activate interest calculation to Yes. The Interest Parameters screen appears.
    • Set the options in the Interest Parameters screen as shown below:
    • Press Ctrl+A to accept the interest parameters.
  3. Accept the screen. As always, you can press Ctrl+A to save.

 

TDS ledger for Interest

  1. Gateway of Tally > Create > type or select Ledger > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > Ledger > and press Enter.
  2. Enter the Name of the ledger.
  3. Select Duties & Taxes group in the field Under.
  4. Select TDS in the field Type of duty/tax.
  5. Select Interest Other Than Interest on Securities in the field Nature of payment.
  6. Set the option Inventory values are affected to No.
  7. Set the option Activate interest calculation to No.
  8. Accept the screen. As always, you can press Ctrl+A to save.

 

Expense ledger for interest amount

  1. Gateway of Tally > Create > type or select Ledger > and press Enter.
    Alternatively, press Alt+G (Go To) > Create Master > Ledger > and press Enter.
  2. Enter the Name of the ledger.
  3. Select Indirect Expenses group in the field Under.
  4. Set the option Inventory values are affected to No.
  5. Set the option Activate interest calculation to No.
  6. Set the option Is TDS applicable to Yes.
  7. Select Interest Other Than Interest on Securities in the field Nature of payment.
  8. Accept the screen. As always, you can press Ctrl+A to save.

 

Journal voucher for the amount payable

  1. Gateway of Tally > Vouchers > press F7 (Journal).
    Alternatively, press Alt+G (Go To) > Create Voucher > press F7 (Journal).
  2. Debit the expense ledger and enter the amount.
  3. Credit the party ledger and press Enter.
  4. Provide the Bill-wise Details and press Ctrl+A to save. The Interest Parameters screen appears.
  5. Accept the parameters in the Interest Parameters screen OR change them if required.
  6. Press Ctrl+A to save.
  7. Select TDS ledger. The amount appears automatically.
  8. Accept the screen. As always, you can press Ctrl+A to save.

 

Voucher class for credit note

You can create voucher class in credit note to account for the interest payable to the party.

  1. Gateway of Tally > Alter > type or select Voucher Type > Credit Note > and press Enter.
    Alternatively, press Alt+G (Go To) > Alter Master > Credit Note > and press Enter.
  2. Specify the Name of Class and press Enter to view the Voucher Type Class screen.
  3. Set the option Use Class for Interest Accounting to Yes.
  4. Press Enter to return to the Voucher Type Alteration screen.
  5. Accept the screen. As always, you can press Ctrl+A to save.

 

Interest on overdue payment

  1. Gateway of Tally > Vouchers > press Alt+F6 (Credit Note)
    Alternatively, press Alt+G (Go To) > Create Voucher > press Alt+F6 (Credit Note).
  2. Select the Voucher Class.
  3. Press F2 (Date) and set the date to day on which the interest amount becomes due.
  4. Select party to whom interest has to be paid. The Interest Details screen appears.
  5. Select required bills.
  6. Press Enter to return to the voucher screen.
  7. Press Enter from the Credit field. The credit amount appears automatically.
    • Select New Ref as the Method of Adjustment in the Bill-wise Details screen.
    • Enter a Name > skip Due Date, or Credit Days fields > press Ctrl+A to save.
    • In the Interest Parameters screen, set zero in the Rate field.
    • Accept the screen. As always, you can press Ctrl+A to save.
  8. Debit the interest payable ledger. The amount appears automatically.
  9. Accept the screen. As always, you can press Ctrl+A to save.

 

Deduct TDS on the interest payable

A journal voucher has to be recorded for TDS deduction against the credit note recorded for interest payable amount. However, without a reference number, the TDS deduction transaction cannot be recorded.

Since TDS reference was not used in credit note, it will appear as an exception in the TDS returns. Resolve this exception to generate a reference that can be used for recording TDS deduction transaction.

Resolve the exception and generation TDS reference

  1. Gateway of Tally > Display More Reports > Statutory Reports >  TDS Reports > Form 26Q.
    Alternatively, press Alt+G (Go To) > type or select Form 26Q > and press Enter.
  2. Select Uncertain Transactions (Corrections needed).
  3. Press Enter. The Summary of Exceptions screen appears.
  4. Select No link is available in booking and booking with deduction voucher under Booking & Booking with Deduction Entries.
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