Fianancial Ac Configuration Model Wit Holding Tax

8/4/2019 Fianancial Ac Configuration Model Wit Holding Tax

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Financial Accounting Configuration Manual Version 1.1

Uncontrolled when printed

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1 INTRODUCTION ............................................................................................................................................... 3

1.1 OVERVIEW...................................................................................................................................................... 3

2 CONFIGURATION DETAILS OF EXTENDED WITHHOLDING TAX .......... .......... ........... .......... .......... . 3

2.1 BASIC SETTINGS ............................................................................................................................................. 3

2.1.1 Check Withholding Tax Countries ......................................................................................................... 32.1.2 Define official withholding tax codes ................... ........... .......... ........... .......... .......... ........... .......... ........ 42.1.3 Define reasons for exemption .......... ........... .......... ........... .......... ........... .......... ........... .......... .......... ........ 42.1.4 Check Recipient Types ........................................................................................................................... 52.1.5 Check Income Types .............................................................................................................................. 82.1.6 Change Message Control for Withholding Tax .................. ........... .......... ........... .......... .......... ........... .... 8

2.2 CALCULATION................................................................................................................................................ 92.2.1 Withholding Tax Type ............................................................................................................................ 9

2.2.1.1 Define Withholding Tax Type for Invoice Posting/payment posting .................. .......... ........... ......... 92.2.1.2 Define Exchange Rate Type for Withholding Tax Type ................... ........... .......... .......... ........... .... 142.2.1.3 Define Rounding Rule for Withholding Tax Type .................... .......... ........... .......... ........... .......... .. 142.2.1.4 Assign Condition Type to Withholding Tax Type ........................................................................... 15

2.2.2 Withholding Tax Codes ........................................................................................................................ 152.2.2.1

Define withholding tax codes .......................................................................................................... 152.2.2.2 Define Formulas for Calculating Withholding Tax ............. ........... .......... ........... .......... ........... ....... 172.2.3 Withholding Tax Base Amount............................................................................................................. 17

2.2.3.1 Define Processing Key for Modified Net Amount (No Configuration) .......... .......... ........... .......... .. 172.2.3.2 Define Processing Key for Modified Tax Amount (No Configuration) ......... .......... ........... .......... .. 172.2.3.3 Portray Dependencies between Withholding Tax Types (No Configuration) ...... ........... .......... ...... 18

2.2.4 Minimum and Maximum Amounts ....................................................................................................... 182.2.4.1 Define Min/Max Amounts for Withholding Tax Types .......... .......... ........... .......... .......... ........... .... 182.2.4.2 Define Min/Max Amounts for Withholding Tax Codes .................................................................. 19

2.3 COMPANY CODE........................................................................................................................................... 192.3.1 Assign Withholding Tax Types to Company Codes .......... .......... ........... .......... ........... .......... .......... ...... 192.3.2 Activate Extended Withholding Tax ..................................................................................................... 20

2.4 POSTINGS ..................................................................................................................................................... 212.4.1 Define Accounts for Withholding Tax .................................................................................................. 21

2.4.1.1 Define accounts for withholding tax to be paid over .......... .......... ........... .......... .......... ........... ......... 212.4.1.2 Define accounts for Grossing up entry (No Configuration) .......... ........... .......... .......... ........... ......... 212.4.1.3 Define Accounts for Self-Withholding Tax (No Configuration) .................... .......... .......... ........... .. 212.4.1.4 Define Accounts for Withholding Tax Offsetting Entry (No Configuration) ................... ........... .... 21

2.4.2 Remittance Challan.............................................................................................................................. 212.4.2.1 Document Types .............................................................................................................................. 212.4.2.2 Numbering of Remittance Challan .................................................................................................. 22

2.4.2.2.1 Maintain Number Groups ......................................................................................................... 222.4.2.2.2 Assign Number Ranges to Number Groups .............................................................................. 222.4.2.2.3 Maintain Number Ranges ......................................................................................................... 23

2.4.3 Numbering of EWT Certificates ........................................................................................................... 252.4.3.1 Maintain Number Groups ................................................................................................................ 252.4.3.2 Assign Number Ranges to Number Groups ..................................................................................... 25

2.4.3.3 Maintain Number Ranges ................................................................................................................ 26


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1 Introduction

1.1 Overview

This document covers the configuration details for Extended Withholding Tax (EWT) which iscommonly understood as Tax Deduction at Source (TDS) in India. The system settings required forEWT are maintained here.

2 Configuration Details of Extended Withholding Tax

2.1 Basic Settings

2.1.1 Check Withholding Tax Countries

Menu Path via IMGFinancial Accounting-Financial Accounting Basic SettingsWithholding Tax--Extended Withholding TaxBasic SettingsCheckWithholding Tax Countries

Table

Transaction

Details of theconfiguration

No configuration

Withholding Tax refers to tax deducted at source. In this step, a country needs to be defined to enablefurther settings for TDS to be done.

Current System Settings

Activate extendedwithholding taxfunctionality.


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2.1.2 Define official withholding tax codes

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxBasic SettingsDefine Official Withholding Tax Keys

Table


Section codes for various sections of Income Tax Act for TDS werecreated.

In this step, keys need to be defined for each section under the IT Act. These keys are in a later step

attached to Tax Types.

Current System Settings

2.1.3 Define reasons for exemption

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxBasic SettingsDefine Reasons for Exemption

Table

Transaction


No configuration


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In this activity, reasons for exemption from withholding tax have to be defined, for country IN. Theseindicators can be entered in the vendor master record or in the company code withholding tax masterrecord information. These will be entered as and when needed.

2.1.4 Check Recipient Types

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxBasic SettingsCheck Recipient Types

Table

Transaction


No configuration


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2.1.5 Check Income Types

No configuration done

2.1.6 Change Message Control for Withholding Tax

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxBasic SettingsChange Message Control for Withholding Tax


Message control has been configured for vendors and customers asshown below


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Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxBasic SettingsIndia Define Tax code


Message control has been configured for vendors and customers asshown below

2.2 Calculation

2.2.1 Withholding Tax Type

2.2.1.1 Define Withholding Tax Type for Invoice Posting/payment posting

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--ExtendedWithholding TaxCalculationWithholding Tax Type-Define Withholding Tax Type forInvoice Posting

Table

Transaction


E.g.: Sec 194CW1: Sec 194C for Contractor InvoiceW2: Sec 194C for Contractor Surcharge InvoiceWA: Sec 194C for Contractor PaymentWB: Sec 194C Contractor Surcharge PaymentE1: Sec 194C Educt. Cess Cont InvoiceE2: Sec 194C Educt. Cess Cont. Inv. SurchargeEA: Sec 194C Educt. Cess Cont. PaymentEB : Sec 194C Educt Cess Cont. Pay(Surch)


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Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--ExtendedWithholding TaxCalculationWithholding Tax Type-Define Withholding Tax Type forPayment Posting


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Note:

Following indicators must always be switched on:

Post w/tax amount - TDS deduction is activated only if this indicator is set

W/tax base manual - allows changing base amount

Manual w/tax amount - allows changing TDS amount

Additionally, the checkbox Liable in the vendor master and W/tax in the customer master must also beswitched on.

In this activity, tax types applicable at the time of posting of payments to vendors need to be defined.These Tax Types too must be stored in the vendor or customer master, which are subject to TDSdeductions. These Tax Types are specially meant for deduction of TDS at the time of payment ofadvance to vendors.

However, it may be noted that if corresponding Tax Codes (refer later chapter), for these TaxTypes, are entered at the time of invoice postings (along with corresponding Tax Codes for TaxTypes for invoice posting), TDS will be deducted both at the time of posting invoice andoutgoing payment!!!

Hence, it is advised that while Tax Types both for invoice posting and payment posting maybe stored in the vendor master, corresponding Tax Code must be stored only for invoiceposting. While making a down payment to the vendor, the Tax Code for payment posting willobviously appear blank, and needs to be removed at that point.

2.2.1.2 Define Exchange Rate Type for Withholding Tax Type

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxCalculationWithholdingTax Type-Define Exchange Rate Type for Withholding Tax Type



2.2.1.3 Define Rounding Rule for Withholding Tax Type

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxCalculationWithholding Tax Type-Define Rounding Rule for Withholding TaxType


As given below


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2.2.1.4 Assign Condition Type to Withholding Tax Type


2.2.2 Withholding Tax Codes

2.2.2.1 Define withholding tax codes

In this step, Tax Codes need to be specified. These codes are attached to Tax Types in the vendor andthe customer masters. The codes contain the rates of tax, which includes the surcharge element (e.g. iftax rate is 10.00% and surcharge is 10%, the rate to be specified in the field With/tax rate is 11%).


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Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxCalculationWithholding Tax Codes- Define Withholding Tax Codes


Configuration done is as tabulated below


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2.2.2.2 Define Formulas for Calculating Withholding Tax

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxCalculationWithholding Tax Codes- Define Formulas for Withholding Tax



2.2.3 Withholding Tax Base Amount

2.2.3.1 Define Processing Key for Modified Net Amount (No Configuration)

No configuration was carried out

2.2.3.2 Define Processing Key for Modified Tax Amount (No Configuration)


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2.2.3.3 Portray Dependencies between Withholding Tax Types (NoConfiguration)


2.2.4 Minimum and Maximum Amounts

2.2.4.1 Define Min/Max Amounts for Withholding Tax Types

Certain IT sections specify that no TDS should be deducted if the total invoices posted for the vendor donot exceed a base amountIn this step, the minimum base amount must be specified. It may be noted that the accumulation (ofinvoices per year) is set in the Withholding Tax Type (indicator under heading Accumulation Type).



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2.2.4.2 Define Min/Max Amounts for Withholding Tax Codes

No configuration done.

2.3 Company Code

2.3.1 Assign Withholding Tax Types to Company Codes

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Company Code Assign Withholding Tax Types to Company Codes


Details are as under


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In the above activity, the following specifications must be made for each Tax Type:

Indicators With/tax agent and Subject to w/tx must be clicked to activate deduction of TDSon vendors and customers, respectively.

Validity period must be specified for each Tax Type, under the vendor data. As regardcustomers, the validity period is specified in the customer master itself.

In the field W/tax number, the TAN numbers for each section have been stored.


2.3.2 Activate Extended Withholding Tax

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Company Code Activate Extended Withholding Tax


Extended Withholding Tax has been activated for Company ABCL


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2.4 Postings

2.4.1 Define Accounts for Withholding Tax

2.4.1.1 Define accounts for withholding tax to be paid over

In this step, G/L account determination is done for each Tax Type, for Chart of Accounts ABCL SAPstandard process WIT.

The rules for the process key have been configured for account determination to be done at the level ofthe tax type.

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding TaxPostingsAccountsfor Withholding Tax-Define Accounts for Withholding Tax to be PaidOver


Details are as under

2.4.1.2 Define accounts for Grossing up entry (No Configuration)


2.4.1.3 Define Accounts for Self-Withholding Tax (No Configuration)


2.4.1.4 Define Accounts for Withholding Tax Offsetting Entry (No Configuration)


2.4.2 Remittance Challan

In this activity we configure settings related to EWT remittance challan.

2.4.2.1 Document Types

Specify document Type for Account Payable/ Account Receivable.

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaRemittance Challan Specify document type


Document Type for tax withheld from Account Payable/ AccountReceivable is defined.


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The following settings are made:-

2.4.2.2 Numbering of Remittance Challan

In this set of activities we configure the numbering of challan for remittance of EWT.

2.4.2.2.1 Maintain Number Groups

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaRemittance Challan Maintain Number Groups


Various number groups depending on the Official withholding TaxCodes are created.

2.4.2.2.2Assign Number Ranges to Number Groups

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaRemittance Challan Assign Number Ranges to Number Groups

Details of the Number ranges are assigned to each number group.


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configuration

2.4.2.2.3Maintain Number Ranges

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaRemittance Challan Maintain Number Ranges


Number ranges are maintained

The configuration details for Number Ranges are as follows:-

From the above screen press Maintain Groups button


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We can select one by one each group and maintain number ranges for that group. Please note thatthe number ranges are maintained on yearly basis.

The following Number Ranges are maintained for ABCL.


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2.4.3 Numbering of EWT Certificates

In this step we configure system settings for automatic numbering of EWT certificates.

2.4.3.1 Maintain Number Groups

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaWithholding Tax Certificates for Vendors and Customers MaintainNumber Groups


Various number groups depending on the Official withholding TaxCodes are created.

2.4.3.2 Assign Number Ranges to Number Groups

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings India


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Withholding Tax Certificates for Vendors and Customers AssignNumber Ranges to Number Groups


Number ranges are assigned to each number group.

2.4.3.3 Maintain Number Ranges

Menu Path IMGFinancial Accounting-Financial Accounting Basic SettingWithholding Tax--Extended Withholding Tax Postings IndiaWithholding Tax Certificates for Vendors and Customers MaintainNumber Ranges


Number ranges are maintained

The configuration details for Number Ranges are as follows:-


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From the above screen press Maintain Groupsbutton


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We can select one by one each group and maintain number ranges for that group. Please notethat the number ranges are maintained on yearly basis.

The following Number Ranges are maintained for ABCL


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TABLE MANUAL UPDATE

J_1IEWTNUMGR

J_1IEWTNUMGR_1

J_1IEWTCALID_N

J_1IEWT_CERT_N

J_1I_SECCODE

Documents

Fianancial Ac Configuration Model Wit Holding Tax