Withholding Tax Final

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Withholding Tax
Withholding tax is an Income tax which is deducted at the source of the revenue. The party that is subject to
tax does not remit the withholding tax to the tax authorities himself.
In any business transaction there are 2 parties involved. One is the customer and another is the vendor. A
customer is authorized to deduct withholding tax for services rendered by the vendor.
When the vendor raises the invoice on the customer, the customer deducts the withholding tax as per the
rates specified by the tax authorities and pays the balance money to the vendor.
The tax deducted by the vendor is remitted to the tax authorities on specified due dates. The vendor gives a
Withholding tax certificate to the customer for the withholding tax deducted.
The customer can claim this withholding tax (as advance income tax paid) in his annual returns to Income tax
authorities.
Check Withholding countries

Path
Access the activity using one of the following navigation options:
Transaction code N/A

IMG path Spro  SAP Reference IMG  Financial Accounting (New)  Financial
Accounting Global Settings (New)  Withholding Tax  Extended
Withholding Tax  Basic Settings  Check Withholding Tax Countries
Implementation
Click on new entries and fill up the details as mentioned below and save it
Define Withholding Tax Keys

Description
Here we define the IT section imposed by Indian Government.
1
Prepared By: Kundan Kumar (Wipro Technology)
Path

IMG path Spro  SAP Reference IMG  Financial Accounting (New) 
Financial Accounting Global Settings (New)  Withholding Tax
 Extended Withholding Tax  Basic Settings  Define
Withholding Tax Keys
Implementation
Click on new entries and fill up the details as mentioned below.
Define Reasons for Exemption

Path

 Extended Withholding Tax  Basic Settings  Define
Reasons for Exemption
Implementation
Click on new entries and fill up the details as mentioned below.
2
Define Withholding Tax Type for Invoice Posting
Path

 Extended Withholding Tax  Calculation  Withholding
Tax Type  Define Withholding Tax Type for Invoice Posting
Implementation
Click on new entries and Give Country key “IN” and fill up the details as mentioned below.
3
Define Withholding Tax Type for Payment Posting
Description
In this activity we define the withholding tax type for posting at the time of paying. We also have to enter the
withholding tax information when entering the document for this withholding tax type.
Procedure

Tax Type  Define Withholding Tax Type for Payment Posting
Implementation
4
Define Withholding Tax Codes

Path

Tax Code  Define Withholding Tax Codes
Implementation
5
Assign Withholding Tax Types to Company Codes
Path

 Extended Withholding Tax  Company Code  Assign
Withholding Tax Types to Company Codes
Implementation
Click on
Fill up the details as mentioned above.
6
Activate Extended Withholding Tax
Path

Withholding Tax  Company Code  Activate Extended Withholding
Tax
Implementation
Click on
Give your company code.
Press enter button twice and save it.
7
Creation of G/L account for TDS posting
8
Define Accounts for Withholding Tax to be Paid Over
Path

Withholding Tax  Company Code  Define Accounts for
Withholding Tax to be Paid Over
Implementation
Give your chart of account, press enter and apply check mark as shown below
9
Save it.
Fill up the details as mentioned above, press enter and save it.
Cross Module Mandatory setting

Activation of CIN in Vendor Master – OMT3E
Double click on
Click on
Give your user ID and save it.
10
Maintain Company Code Settings

Path -> SPRO - Logistics – General - Tax on Goods Movements – India - Basic Settings - Maintain Company
Code Settings
Give your company code and first month (as per fiscal year) and save it.
Assign Withholding Tax to Vendor Master – FK02
Give your vendor no. , apply a check mark on , and press enter.
11
Click on then click on
Fill up vendor’s PAN No. as mentioned above.
Fill up the details as mentioned above (fill up WT country code, WT Type and WT Tax code) and save it.
12
Post vendor Invoice – FB60
Click on simulate and press enter.
TDS 10% deducted successfully.
Save the transaction.
13
TDS Posting with 60% Exemption Scenario

Update exemption details to vendor master – FK02
Fill up the details as mentioned above and save it.
14
Post Vendor Invoice – FB60
Simulate the transaction to view account entry with exemption.
System is able to provide 60% exemption as specified in Vendor Master.
Save it.
15

Withholding Tax Final

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Withholding Tax Final

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Company Logo SAP FICO Configuration Document Client Logo

Check Withholding countries

Transaction code N/A

Define Withholding Tax Keys

Transaction code N/A

Click on new entries and fill up the details as mentioned below.

Define Reasons for Exemption

Transaction code N/A

Click on new entries and fill up the details as mentioned below.

Define Withholding Tax Type for Invoice Posting

Transaction code N/A

Define Withholding Tax Type for Payment Posting

Transaction code N/A

Define Withholding Tax Codes

Transaction code N/A

Assign Withholding Tax Types to Company Codes

Transaction code N/A

Fill up the details as mentioned above.

Activate Extended Withholding Tax

Transaction code N/A

Give your company code.

Press enter button twice and save it.

Creation of G/L account for TDS posting

Define Accounts for Withholding Tax to be Paid Over

Transaction code N/A

Cross Module Mandatory setting

Give your user ID and save it.

Maintain Company Code Settings

Assign Withholding Tax to Vendor Master – FK02

Click on then click on

Fill up vendor’s PAN No. as mentioned above.

Post vendor Invoice – FB60

Click on simulate and press enter.

TDS 10% deducted successfully.

Save the transaction.

TDS Posting with 60% Exemption Scenario

Fill up the details as mentioned above and save it.

Post Vendor Invoice – FB60

Simulate the transaction to view account entry with exemption.

System is able to provide 60% exemption as specified in Vendor Master.

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