Withholding Tax on Interest Payments to Customers 

Use

Under Section 194 A of the Income Tax Act you are required to withhold tax on interest payments that you make to customers.

To calculate the interest, use the Balance Interest Calculation program, which calculates the interest and the amount of tax to be withheld.

Activities

Customizing

You have made the settings for interest calculation in Customizing for Financial Accounting (FI), by choosing Accounts Receivable and Accounts Payable  ® Business Transactions  ® Interest Calculation.

Periodic Processing

Execute the program as described in the documentation.

There are two types of output. The system either creates a batch input session, which you can process, or it displays the details of the interest to be posted, which you can post manually. In both cases, you must ensure that each customer line item contains a section code.

The program creates an accounting document as follows:

It copies the section code from the customer line item to the withholding tax item, and calculates the tax due date (see Tax Due Dates).