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 Withholding Tax

Use

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)

Features

Country Version India offers you two solutions for handling withholding tax (also known as tax deducted at source or TDS). You can either use the Classic Withholding Tax solution or the Extended Withholding Tax solution.

Note Note

If you are installing the SAP system for the first time, we recommend that you use the Extended Withholding Tax solution . Before you decide one way or the other, however, you must give careful consideration as to whether Extended Withholding Tax covers your requirements. If you start working with this solution and it transpires that it does not cover your needs, SAP does not offer a strategy for migrating to Withholding Tax .

End of the note.

Taxes withheld under each section are treated differently with regard to the time limits for remitting tax to the authorities, providing the taxpayer with a withholding tax certificate, and filing a quarterly return. In addition, the formats for the withholding tax certificates and the returns also differ.

The Income Tax Act requires you to calculate taxes as soon as you enter an invoice. However, if you make a down payment to a vendor before you have received an invoice from it, you withhold tax on the down payment. Then, once the invoice arrives, you clear the down payment against it.

When you prepare your quarterly returns, the act also requires you to make provisions for taxes on services received but not yet invoiced.

Country VersionIndia

Country Version India complements the generic Classic Withholding Tax and Extended Withholding Tax solutions with additional functions that meet the needs of the Income Tax Act. These functions allow you to:

  • Ensure that you remit taxes within the due date

  • Track and report withholding tax surcharges separately

  • Adjust withholding taxes when you clear a down payment against an invoice

  • Prepare withholding tax certificates and quarterly returns

  • Calculate withholding tax on provisions

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