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Tax collected at Source:

Configurations required –

1. Withholding tax key is maintained for TCS as below –

2. Withholding tax types are maintained for TCS on base, surcharge, ECS and
SECess as below –
Since this withholding tax is configured with Base amount as Modified net
amount, the base for the withholding tax will be the net amount (i.e., not inclusive
of the tax condition values.) In case you wish to add some tax condition values to
the base for TCS calculation, you will need to maintain the posting key assigned
to the tax condition type in the pricing procedure along with the combination of
the withholding tax code assigned to the TCS related condition type at the
following location:
SPRO -> Financial Accounting (New) -> Financial Accounting Global
Settings (New) -> Extended Withholding Tax -> Withholding Tax Base
Amount -> Define processing key for Modified Net Amount

By doing so, the condition values of the tax condition types assigned for these
processing keys will also be included in the base for the withholding tax
3. Create the access sequence for withholding tax for TCS in SD –

Copy the existing access sequence J1AW and create the new access sequence
J1IW with the following accesses:
4. Create condition types corresponding to Tax collected at Source in SD –
5. Withholding tax types must be assigned to condition types maintained in SD
for TCS –

6. Define Withholding tax codes for TCS as given below –

Set the withholding tax rate as per requirement here.
7. Since posting will happen from SD as well as from FI with the TDS code, off-
setting concept posting is used for the TCS tax types. The GL accounts are
assigned as below –
Same G/L account should be maintained for transaction key WIT based
tax line item and the SD-FI condition based tax line item.
A different G/L account has to be maintained for the transaction key OFF
based line item.

8. Pricing procedure changes. The condition types corresponding to TCS will

have to be adding to the pricing procedure as shown below –

The condition types for TCS (JTCS, JTEC AND JTSE) are to be defined as
statistical in the pricing procedure. The system calculates the values in SD but
doesn’t post them directly from SD. Posting would take place with the condition
type assignment to TCS withholding tax types. (as configured earlier in step 5)

9. We will need to define a new condition type and add this to the pricing
procedure to post to the FI. This condition type will be manual and can be
manually filled at the time of creation of sales order. This can also be copied
from the statistical TCS condition types in the pricing procedure.

For example, the screen shot below shows how to create the condition type
corresponding to TCS which would be posted to FI:
This condition type JWTS will have to be added to the pricing procedure. This is
not maintained as statistical and has a corresponding accounting key –

Similar condition types will have to be created and added to the pricing procedure
for ECS on TCS and SECess on TCS.
10. The accounts for withholding tax to be paid must be maintained for the TCS
withholding tax type and TCS withholding tax code combination as given
below -