Surcharges 

Use

As well as withholding tax on payments to vendors, in India, you may also be required to withhold a surcharge.

Features

Some tax offices require you to track surcharges separately from the basic withholding tax, that is, to create separate line items for the surcharges. Others prefer you to combine the two in a single line item. The system supports both calculation methods.

Activities

Customizing

Set up the surcharge function in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings ® Withholding Tax ® Extended Withholding Tax ® Basic Settings ® India ® Surcharges.

Create withholding tax types and withholding tax codes for the surcharges. The standard system comes with samples for both.

Day-to-Day Activities

When you enter a vendor invoice, the system automatically calculates any surcharges that apply. It either creates one withholding tax item or two, depending on how you have customized the system.

The following examples assume that the surcharge is 2% of the basic-rate withholding tax:

Vendor Invoice with Surcharges Shown Separately

Vendor Invoice with Surcharges Combined with Other Withholding Tax Items

Reporting

No matter which of the calculation methods you use, TDS returns show the surcharges separately.