Withholding Tax Code 
Definition
For generic
information about withholding tax codes, see 
Defining Withholding
Tax Codes.
Use
Customizing
Define the withholding tax codes in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings ® Withholding Tax ® Extended Withholding Tax ® Calculation ® Withholding Tax Codes ® Define Withholding Tax Codes.
Country Version India comes with a sample tax code for each of the sample withholding tax types provided. The basic-rate withholding tax codes are set to 2%; the surcharge tax codes are set to 0.4%.
For reporting purposes, assign each withholding tax code to a withholding tax key.
Observe the special procedures when you customize withholding tax codes for Section 194 A of the Income Tax Act (see Exemptions and Reduced Rates for Section 194 A).
You must use withholding tax codes with posting indicator 1, otherwise you cannot clear down payments against invoices or remit withholding taxes.
Master Data
Assign the appropriate withholding tax codes to your vendor masters and customer masters.
Day-to-Day Activities
When you enter a document that is liable to tax (for example, when you enter a vendor invoice), the system automatically applies the tax type and tax code appropriate to that vendor or customer.
See also: