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.
The source, which can be a person or an organization, is known as the Deductor.
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.
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?
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.
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.
|Section||Nature of Payment||Payment Code|
|Section||Nature of Payment||Payment Code|
|192||Payment to Govt. Employees other than Union Government Employees||92A|
|192||Payment of Employees other than Govt. Employee||92B|
|193||Interest on Securities||193|
|194A||Interest other than interest on securities||94A|
|194B||Winnings from lotteries and crossword puzzles||94B|
|194BB||Winnings from horse race||4BB|
|194C||Payment of contractors and sub-contractors||94C|
|194E||Payments to non-resident Sportsmen/Sport Associations||94E|
|194EE||Payments in respect of Deposits under National Savings Schemes||4EE|
|194F||Payments on account of Re-purchase of Units by Mutual Funds or UTI||94F|
|194G||Commission, prize etc., on sale of Lottery tickets||94G|
|194H||Commission or Brokerage||94H|
|194J||Fees for Professional or Technical Services||94J|
|194K||Income payable to a resident assessee in respect of Units of a specified Mutual Fund or of the units of the UTI||94K|
|194LA||Payment of Compensation on acquisition of certain immovable property||4LA|
|194LB||Income by way of Interest from Infrastructure Debt fund||4LB|
|194LC||Income by way of interest from Indian company engaged in certain business||4LC|
|195||Other sums payable to a non-resident||195|
|196A||Income in respect of units of Non-Residents||96A|
|196B||Payments in respect of Units to an Offshore Fund||96B|
|196C||Income from foreign Currency Bonds or shares of Indian Company payable to Non-Resident||96C|
|196D||Income of foreign institutional investors from securities||96D|
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 fee paid 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
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.
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.
Provide PAN Details: Yes
The screen will look like this.
Press Enter and save.
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’.
The screen will look like this , important fields are marked.
Save the screen.
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.
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.
There are Two main reports in TDS Report section
- 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.
- 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.
Hope You got Clear Idea on implementing TDS in Tally ERP9.