Withholding tax procedure

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Withholding Tax

Tax that is charged at the beginning of the payment flow in some countries. Usually, the party that is

subject to tax does not pay the withholding tax over to the tax authorities himself.

When a customer that is authorized to deduct withholding tax pays invoices from a vendor subject to

withholding tax, the customer reduces the payment amount by the withholding tax proportion. Thecustomer then pays the tax withheld directly to the appropriate tax authorities (see diagram).

Withholding Tax

Use

To calculate, pay, and report the withholding tax, the SAP System provides two functions:

Classic Withholding Tax (all Releases)

Extended Withholding Tax (from Release 4.0)

For each company code, you can decide whether you want to use classic or extended withholding tax. Since

the extended withholding tax option includes all the functions of classic withholding tax, SAP recommends

the use of extended withholding tax (see below: Table of Classic and Extended Withholding Tax

Functions).

If you have previously used classic withholding tax, and now wish to change over to extended withholding

tax, you must first convert the withholding tax data in all the company codes affected.

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Classic and Extended Withholding Tax Functions

Individual Functions Classic

Withholding

Tax

Extended

Withholding Tax

Withholding tax on outgoing payment X X

Withholding tax on incoming payment XWithholding tax posting at time of payment X X

Withholding tax posting at time of invoice X

Withholding tax posting on partial payment X

Number of withholding taxes for each document item Max. 1 Several

Withholding tax base: Net amount X X

Modified net amount X

Gross amount X X

Tax amount X

Modified tax amount X

Rounding rule X

Cash discount considered X

Accumulation X

Minimum/maximum amounts and exemption limits XNumber assignment on document posting (certificate

numbering)

X

Calculation formulas X X

Country Version India comes ready configured with all the settings you need to track and remit

withholding taxes under the following sections of the Income Tax Act, 1961:

Payments to contractors and subcontractors (Section 194 C)

Insurance commission (Section 194 D)

Rent (Section 194 I)

Fees for professional or technical services (Section 194 J)

Interest other than interest on securities (Section 194 A) only supported in the Extended

Withholding Tax solution

The key concept in extended withholding tax is the distinction between withholding tax type and

withholding tax code.

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Check Withholding Tax Countries

PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)

Withholding Tax Extended Withholding Tax Check Withholding Tax Countries

It will display another screen click on so it will display the following screen:

Define Withholding Tax Type for Invoice Posting

PATH: SPROFinancial Accounting (New) Financial Accounting Global Settings (New)

Withholding TaxExtended Withholding TaxCalculationWithholding Tax TypeDefine

Withholding Tax Type for Invoice Posting

Database Table: T059P, T059U

W/Tax type P1

Description

Base Amt Gross Amount

Rounding Rules With holding Tax Common Round

Post W/Tax Amt Select

Accum Type Per Year Starting with Month

Control Data Select W/Tax Base Amount

Select W/Tax AmountNo Cert Numbering

Region APDefine Min/Max

Amounts

Base Amount Select W/Tax Code Level

W/Tax Amount Select W/Tax Code Level

Except W/Tax Type and description all settings are same for other withholding tax types.

W/Tax typeDescription Education Cess on TDS

Base Amount Tax Amount

Select Inherit Base

Accumulation Type No Accumulation Type

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W/Tax type

Description Higher Education Cess on TDS

Base Amount Tax Amount

Select Inherit Base

Accumulation Type No Accumulation Type

Define Withholding Tax Keys


Withholding Tax Extended Withholding Tax Basic Settings Define Withholding Tax Keys

Database Table: T059O, T059OT

Official W/Tax Key :

Name :

Check Recipient Types


Withholding Tax Extended Withholding Tax Basic Settings Check Recipient Types

Database Table: T059C, T059D

A system object that you use to classify payment recipients as legal persons or natural persons, for the

purposes of withholding tax reporting.

For each withholding tax type, create two entries as follows:

Recipient Type Text

CO Companies

OT Others

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Country Key IN

Withholding TaxType

Recipient Type

Text

Companies Others

Check Income Types


Withholding Tax Extended Withholding Tax Basic Settings Check Income Types

Database Table: T059E, T059G

Country:IN

Income Type: 001 Commission

002 Rent003 Contract Amount

Define Business Places

PATH: SPRO Cross-Application Components General Application Functions Nota fiscal CNPJ

Business Places Define Business Places

By the above screen it will display the following window:

Company Code:

click on so it will display the following screen:

Business Place :

Address :

Define Section Codes


Withholding Tax Extended Withholding Tax Basic Settings South Korea Define Section Codes

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A system object that represents the organizational unit responsible for collecting and remitting withholding

tax, as identified by a TAN. Each company can have more than one TAN, so in the SAP system, a

company code can also have multiple section codes.

When you post a document with a withholding tax item (for example, a vendor invoice or a credit memo),enter the section code in order to make sure that the tax item is assigned to the correct TAN.

Company Code:

Select New Entries

Section Code :

Business Place :

Address

Define Business Places


Withholding Tax Extended Withholding Tax Basic Settings India Define Business Places

New Entries Button:

Company Code :

Section Code :

Name1 :

Assign Factory Calendars to Business Places


Withholding Tax Extended Withholding Tax Basic Settings India Assign Factory Calendars toBusiness Places

In the display another screen click on so it will display the following screen:

Company Code :Section Code: ;

Factory Calendar :Rule :

Maintain Tax Due Dates


Withholding Tax Extended Withholding Tax Basic Settings IndiaMaintain Tax Due Dates

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In this IMG activity, you maintain the various tax due dates. Because due dates can differ, depending on the

withholding tax type and recipient type, you can maintain the dates at this level. Make sure that you

maintain entries for all the recipient types that you use.

For each permutation of official withholding tax key and recipient type, specify when the tax has to beremitted.

Select New Entries Button

Country :

Off.WH Tax Key :

Receipent Type :No of Days until tax due date :

Define Withholding Tax Codes


Withholding Tax Extended Withholding Tax CalculationWithholding Tax Codes Define

Withholding Tax Codes

Database Table: T059Z, T059ZT

Country Key : IN

Withholding Tax Type :

W/Tax Code :

Off.W/Tax Key :Description : TDS On Base Amount

Percentage Sub Tax :

Post.Indic :W/Tax Rate :

Region :

Income Type :

click on next entry button

W/Tax

Type W/Tax Code

Off.W/Tax

Key Description

Percentage

Subj Tax Post.Indic W/Tax Rate Region

Incom

Type

Education

cess on TDS 100 1 2HigherEducationCess on TDS 100 1 2

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Portray Dependencies Between Withholding Tax Types


Withholding Tax Extended Withholding Tax CalculationWithholding Tax Base Amount Portray

Dependencies Between Withholding Tax Types

Database Table: T059P, T059U

Country Key : IN

Define Min/Max Amounts for Withholding Tax Codes


Withholding Tax Extended Withholding Tax CalculationMinimum and Maximum Amounts

Define Min/Max Amounts for Withholding Tax Codes

Database Table: T059MINMAX

Country Key : IN


Withholding Tax Type :W/Tax Code :

Currency :

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Valid From :

Maximum Base Amount :

Now click on next entry button for another entry as below:

Withholding Tax Type :

W/Tax Code :Currency :

Valid From :

Maximum Base Amount :

Assign Withholding Tax Types to Company Codes


Withholding Tax Extended Withholding Tax Company Code Assign Withholding Tax Types to

Company Codes

Database Table: T001WT

It will display a screen click on so it will display the following screen:

CoCd W/Tax Type Rec Type W/Tax Agent

W/TaxObligated

From

W/Tax

Number

Activate Extended Withholding Tax


Withholding Tax Extended Withholding Tax Company Code Activate Extended Withholding Tax

Database Table:

click on

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Company Code :

Ext.W/tAx : Select the check box

Creation of required G/L a/cs for Withholding Tax

The following 4 G/L account creates with following PATH:

PATH: AccountingFinancial AccountingGeneral LedgerMaster RecordsG/L

AccountsIndividual ProcessingFS00 - Centrally

G/L a/c

Number

Compan

y .Code

Acc.

Group

P&L

Statement

acct /

Balance

Sheet

Account

Short

Text /

G/L Acct

Long

Text

Only

balance

in Local

Currency

Open item

Management

Line Item

Display

Sort

Key

Field

Status

Variant

Pos

Automa

lly on

Liabilities

Balance

Sheet

Account

TDS a/c X X X 001 G001 X

Liabilities P&LEducation

Cess a/cX 001 G001 X

Liabilities P&L

Higher

EducationCess a/c

X 001 G001 x

Define Accounts for Withholding Tax to be Paid Over

PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding

TaxExtended Withholding TaxPostingAccounts for Withholding TaxDefine Accounts for

Withholding Tax to be Paid Over

Chart of accounts :

Select withholding Tax Code

Select withholding Tax Type and Save

W/Tax Type W/Tax Code GL Account

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In the above screen we assign G/L accounts with respective W/Tax type and W/Tax code to transaction key

WIT.

Specify Document Type (Accounts Payable)


TaxExtended Withholding TaxPosting India Remittance Challans Document Types Specify

Document Type (Accounts Payable)

Database Table: J_1IEWT_CUST


Co Cd :

Doc Type : SA

Save the activity and back to SPRO screen.

Remittance Challan

A document, in India, that you present to a bank, when depositing any form of withholding tax that you

have retained. The challan states how much tax is being deposited. A separate challan is required for each

form of withholding tax.

Maintain Number Groups


TaxExtended Withholding TaxPosting India Remittance ChallansMaintain Number Groups

Database Table: J_1IEWTNUMGR_N

Click on

Company Code :

Section Code :

Off.W/Tax Key :

Number Group :

Assign Number Ranges to Number Groups


TaxExtended Withholding TaxPosting India Remittance Challans Assign Number Ranges toNumber Groups

Click on so:

Number Group :

Intr NR :

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This is your HigherEducation G/L account


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Maintain Number Ranges


TaxExtended Withholding TaxPosting India Remittance ChallansMaintain Number Ranges

By the above PATH it will display an screen click on button so it will display the followingscreen:

Group Menu -- > Insert

Company Code :

Maintain Number Groups and SAPscript Forms

In this IMG activity, you specify which SAP script forms you want to use to print the withholding tax

certificates. These forms are used when you:

Print withholding tax certificates for vendors

Print withholding tax certificates for customers

Country Version India comes with a form, J_1IEWTCERT, which you can use as the basis for creating

your own forms.


TaxExtended Withholding TaxPosting IndiaWithholding Tax Certificates for Vendors and

CustomersMaintain Number Groups and SAPscript Forms


Company Code :

Sec Code :Off.W/Tax Key :

Form : J_1IEWTCERT

Number Grp :

Assign Number Ranges to Number Groups

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Customers Assign Number Ranges to Number Groups


Maintain Number Ranges



CustomersMaintain Number Ranges

By the above PATH it will display an screen click on button so it will display the followingscreen:

Maintain Company Code Settings - Excise Registrations

PATH: SPTO Logistics - General Tax on Goods Movements India Basic SettingsMaintain

Company Code Settings


CoCd :

Assign Withholding Tax to Vendor Master Data

PATH: Accounting Financial Accounting Accounts PayableMaster RecordsMaintain

Centrally XK02 Change

Vendor No :

CoCd :

Pur.Org :

Select Withholding Tax Check Box

W/Tax Type W/Tax Code Liable Rec Type

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Posting Vendor Invoice

PATH: AccountingFinancial AccountingAccounts PayableDocument EntryF-43 - Invoice

GeneralTransaction Code: F-43

Report

PATH: AccountingFinancial AccountingGeneral LedgerAccountFBL3N - Display/Change Line

Items.

Transaction code: FBL3N

In the displayed select required all tax relevant G/L a/c number s and executive the screen it will display the

following report screen

Create Remittance Challan

PATH: AccountingFinancial AccountingAccounts PayableWithholding TaxIndiaExtended

Withholding TaxRemittance of Withholding TaxJ1INCHLN - Create Remittance Challan

Transaction code: J1INCHLN

By above PATH it will display the following screen:

CoCd` :FY :

Bus Place :

Posting Dt :

Section :

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Rec Types :

Doc Date :

Posting Date: :

Bank Account :

Bus Area :

Report

PATH: AccountingFinancial AccountingGeneral LedgerAccountFBL3N - Display/Change Line

Items.

Transaction code: FBL3N

In the displayed select required all tax relevant G/L a/c number s and executive the screen it will display the

following report screen

In the above screen you can view all open items of taxes are cleared.

Enter Bank Challan


Withholding TaxRemittance of Withholding Tax J1INBANK - Enter Bank Challan

Transaction code: J1INBANK

1) Company code,2) Fiscal year,

3 Challan clearing number

4) Bank challan number (give any new number that ma be alphanumeric),

5) Bank challan date,

6) Bank key (your house bank key).

Now click on Executive button so it will display the following information:

Bank Challan Update:

J1INBANK - Enter Bank Challan

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Certificates Print


Withholding Tax Certificates J1INCERT - Print

Transaction code: J1INCERT

By above PATH it will display the following screen:

In the above screen:

1) Company code 6) Bank Challan Numbers

2) Fiscal Year 7) Bank Challan Dates

3) Business Place / Section code 8) Vendors4) Section 9) Certificate Date

5) Posting dates 10) Signatory

11) Designation

12) Place of Printing

.

View Maintainance : SM30

J_1IEWTNUMGR_1 - Number Group for Internal Challan Numbers

J_1IEWTNUMGR_N -

J_1IEWT_CERTNO

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J_1IEWT_CERTNO

J_1IEWTNUMGR_N

J_1IEWTNUMGR_1

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Documents

Withholding tax procedure