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    What Is TDS?: When and How To Deduct TDS?

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    Michael Wells
    TDS or Tax Deducted at Source is an Indian tax collection method where a percentage of certain types of payments like salary, interest, rent, etc. are deducted and deposited with the tax authorities by the payer. In Tally ERP9, TDS can be set up by creating TDS ledgers and nature of payment codes, and applying TDS to relevant transactions like expense vouchers. Reports like Form 26Q and Form 27Q help file quarterly TDS returns with the Income Tax department.

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    What Is TDS?: When and How To Deduct TDS?

    Uploaded by

    Michael Wells
    102 views12 pages
    TDS or Tax Deducted at Source is an Indian tax collection method where a percentage of certain types of payments like salary, interest, rent, etc. are deducted and deposited with the tax authorities by the payer. In Tally ERP9, TDS can be set up by creating TDS ledgers and nature of payment codes, and applying TDS to relevant transactions like expense vouchers. Reports like Form 26Q and Form 27Q help file quarterly TDS returns with the Income Tax department.

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    What is TDS

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    TDS or Tax Deducted at Source is an Indian tax collection method where a percentage of certain types of payments like salary, interest, rent, etc. are deducted and deposited with the tax authorities by the payer. In Tally ERP9, TDS can be set up by creating TDS ledgers and nature of payment codes, and applying TDS to relevant transactions like expense vouchers. Reports like Form 26Q and Form 27Q help file quarterly TDS returns with the Income Tax department.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    102 views12 pages

    What Is TDS?: When and How To Deduct TDS?

    Uploaded by

    Michael Wells
    TDS or Tax Deducted at Source is an Indian tax collection method where a percentage of certain types of payments like salary, interest, rent, etc. are deducted and deposited with the tax authorities by the payer. In Tally ERP9, TDS can be set up by creating TDS ledgers and nature of payment codes, and applying TDS to relevant transactions like expense vouchers. Reports like Form 26Q and Form 27Q help file quarterly TDS returns with the Income Tax department.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 12

    What is TDS?

    TDS or Tax Deducted at Source, is a means of indirect tax collection by Indian authorities
    according to the Income Tax Act, 1961. TDS is managed by the Central Board of Direct
    taxes.In this guide lets learn how to set-up TDS in Tally ERP9.

    When and how to deduct TDS?


    Income and expenditure such as salary, lotteries, interests from banks, payment of
    commissions, rent payment, payments to freelancers, etc. fall under the ambit of TDS.
    When making payments under these segments, a percentage of the overall payment is
    withheld by the source that is making the payments.

    Deductor
    The source, which can be a person or an organization, is known as the Deductor.

    Deductee
    The person whose payment is getting deducted is called the Deductee. For instance,John
    smith LLP paid  Audit fee to Vikas Gupta,

     Deductor is John Smith LLP.


     Deductee: Vikas Guptha.
    To Know more about Tax deducted at source You can visit this link.
    Example Transaction for TDS in Tally ERP9 used in this Guide.
    On 01-02-2016 John Smith LLP Paid to Mr. Vikas Gupta  ACA, Rs 50000 as Audit fee ,TDS
    deducted @ 10%  Rs 5000/-
    We are going to implement TDS in Tally ERP9 based on above Expense  transaction.

    If You Don’t like to read, You like see how TDS is implemented,we have a video tutorial.

    Or Continue to read.

    How to activate TDS in Tally ERP9?


    Step1
    Go to Gateway of Tally > F11: Features > Statutory and Taxation
    Enable following options by typing ‘Yes’

    Enable Tax deducted at source ( TDS) ?

    Set/alter TDS details?


    You will get a new screen where you can enter Company TDS Deductor details. Enter all
    those details as in the below image.

    In side Deductor details there is an option set/alter details of person responsible ? set this
    Yes, you will have a new screen where the details of person responsible details. Enter
    responsible person name.
    Enter and save all three screens. Now we have activated TDS in Tally ERP9.

    Step2
    Creating TDS nature of payment.
    Before creating TDS nature of payment, you should know there are some transactions
    specified under Income Tax rules attract TDS. Here is a list transaction and its payment
    code.

    Nature of Payment

    Section Payment Code


    Section Nature of Payment Payment Code
    192 Payment to Govt. Employees 92A
    other than Union
    Government Employees
    192 Payment of Employees other 92B
    than Govt. Employee
    Nature of Payment

    Section Payment Code


    193 Interest on Securities 193
    194 Divident 194
    194A Interest other than interest 94A
    on securities
    194B Winnings from lotteries and 94B
    crossword puzzles
    194BB Winnings from horse race 4BB
    194C Payment of contractors and 94C
    sub-contractors
    194D Insurance Commission 94D
    194E Payments to non-resident 94E
    Sportsmen/Sport
    Associations
    194EE Payments in respect of 4EE
    Deposits under National
    Savings Schemes
    194F Payments on account of Re- 94F
    purchase of Units by Mutual
    Funds or UTI
    194G Commission, prize etc., on 94G
    sale of Lottery tickets
    194H Commission or Brokerage 94H
    194I Rent 94I
    194J Fees for Professional or 94J
    Technical Services
    194K Income payable to a resident 94K
    assessee in respect of Units
    of a specified Mutual Fund
    or of the units of the UTI
    194LA Payment of Compensation 4LA
    on acquisition of certain
    immovable property
    194LB Income by way of Interest 4LB
    from Infrastructure Debt
    fund
    194LC Income by way of interest 4LC
    Nature of Payment

    Section Payment Code


    from Indian company
    engaged in certain business
    195 Other sums payable to a 195
    non-resident
    196A Income in respect of units of 96A
    Non-Residents
    196B Payments in respect of Units 96B
    to an Offshore Fund
    196C Income from foreign 96C
    Currency Bonds or shares of
    Indian Company payable to
    Non-Resident
    196D Income of foreign 96D
    institutional investors from
    securities
    For more authority report and TDS rate chart visit income tax official website

    To create TDS nature of payments,

    Go to Gateway of Tally > Accounts Info. > Statutory Info. > TDS Nature of


    Pymts > Create
    Lets create ‘Fees for Professional or Technical Services’ as Audit feepaid is a
    professional fees.
    The screen look like this and fill all the details within.
     Name: The name of nature of payment, here our example ‘Fees for Professional or
    Technical Services.
     Section: Enter Section under income tax for the nature of payments pick from the
    table given above.
     Payment Code: This is the payment code in which payment is to be made, this
    information also available in the Table given above. Here its is 94J
     Rate : Rate of TDS as per Income tax rule , here a link for that
     Threshold Limit: This is the limit at which the deduction is exempted as per rule,
    this information also available in the link given above. In our case it 30000.
    Press enter and save the screen

    Step 3
    Create an Expense ledger with TDS applicability.
    In our case Audit fee is the expense ledger.
    Gateway of Tally >Accounts info>Ledger>Create

    Give all the details, Like name, under- indirect expense and most importantly under
    statutory information  choose,

     Is TDS Applicable? :Applicable
     Nature of Payment: Choose the TDS nature of payment we have created above,
    Fees for Professional or Technical Services.

    Press enter and save or use Ctrl + A.

    Step4
    Creating Party Ledger with TDS deductability.
     
    Go to Gateway of Tally>Accounts info>Ledger>Create.

    Fill the details as usual,

    Under statutory Information


    Is TDS Deductable?  Yes
    Deductee Type : Choose whichever is applicable from the list, in our case lets choose
    ‘Individual-Resident’.
    Deduct TDS in the same voucher : Yes

    Under Mailing Details:  fill all details and especially


    Provide bank details: Yes and fill sub screen.

    Under Tax Registration Details.


    PAN: NJDPG5464K
    Provide PAN Details: Yes

    The screen will look like this.

    Press Enter and save.


    Step5
    Creating TDS Ledger in Tally ERP9
    Go to Gateway of Tally>Accounts info>Ledger>Create
    Enter the TDS Ledger details as in below.
    Name: TDS on Professional Fee
    Under: Duties & Taxes.
    Types of duty/tax: TDS
    Nature of payment : TDS Nature of payment we have created above ‘Fees for Professional or
    Technical Services’.

    Save the screen.

    Step 6
    TDS on Transaction in Tally ERP9.
    In our case Audit fee payment is the transaction that attract TDS,Let’s make a bank payment
    to Vikas Gupta.
    Go to Gateway of Tally>Accounting Voucher>Journal.
    Debit the expense ledger with Total amount, then credit Party amount after deducting TDS
    and TDS ledger with TDS Amount.

    See the Journal Voucher Screen shot below.


    Press enter and save the screen.

    Step7
    TDS Payment in Tally ERP9
    TDS should be paid on or before the 7th of Nex month. So in our example pay it on or before
    7th march 2016.
    Gateway of Tally>Accounting Voucher>F5 Payment
    In Payment voucher there is a button on the right button panel called ‘Stat Payment’.

    On clicking Stat Payment ,You will get a new screen,where  you can select pending TDS
    details.
    Select All details and press enter.The final payment screen will be as follows.

    Enter bank allocation details and save the screen.

    On printing TDS Payment voucher, you will get Offline bank Payment ITNS 281 Challan.
    TDS Reports
    There are Two main reports in TDS Report section

    1. Form 26 Q : As per the Income Tax Act, 1961, every corporate and government
    entity responsible for deduction of tax at source should furnish TDS returns containing
    details of deductee(s) and challan details relating to deposit of tax with the Income Tax
    Department. Form 26Q is the Quarterly return of TDS in respect of all payments other
    than salaries.  This is applicable for Resident and the due date for Government entities is
    July 31st, October 31st, January 31st, and May 15th; for non-government entities the due
    dates for filing returns are July 15th, October 15th, January 15th, and May 15th.
    Form26 Q can be accessed from

    Gateway of Tally > Display > Reports > Statutory Reports > TDS Reports > Form 26Q.

    2. Form 27 Q : Form 27Q is a Quarterly return for deduction of tax in respect of


    payments made to non-residents other than salary.
    Form 27 Q can be accessed in Tally ERP9
    Gateway of Tally > Display > Reports > Statutory Reports > TDS Reports > Form 27Q.

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