Extended Withholding Tax 
Use
Country Version
India contains a number of features that complement the generic Extended Withholding Tax solution. For information about the
generic functions, see 
Extended Withholding
Tax. The country-specific features are described in the following
documentation.
Features
Using the Extended Withholding Tax solution, you can withhold and report tax under all sections of the Income Tax Act listed in Withholding Tax.
Since a company may consist of more than one entity responsible for withholding taxes, each of which is identified by a separate TAN, you use a separate SAP organizational unit to represent each entity, the section code.
Activities
Customizing
For generic
information about customizing Extended Withholding
Tax, see Settings for Extended
Withholding Tax: Overview.
Country Version India comes with sample Customizing settings for all of the aforementioned sections of the Income Tax Act. The settings include:
· Withholding tax types
· Withholding tax codes
· Official withholding tax keys, which represent the different sections of the Income Tax Act
· Recipient types, which represent the categorization of taxpayers into "companies" and "others," again, as per the Income Tax Act
You must also customize your own section codes.
Master Data
Enter the required information in the vendor masters and in the customer masters.
Day-to-Day Activities
You are required to calculate taxes either when you enter an invoice or when you make any sort of payment, whichever comes first. Since a full payment is seldom made before the invoice arrives, that means in effect that you withhold taxes when you enter an invoice or a down payment.
When you enter a vendor invoice or make a down payment that is liable to withholding tax, the system automatically creates line items for the appropriate taxes, including surcharges. Since different taxes need to be remitted on different dates, depending on the section of the Income Tax Act, the system also calculates and records each line item's due date.
If you first make a down payment (and withhold tax on it) and then enter the vendor invoice later on, you have to clear the invoice against the down payment so that you do not withhold tax on the same item twice.
As far as your receivables are concerned, you also enter withholding tax certificates sent to you by your customers, as proof of tax that they have withheld on payments to you.
Periodic Processing
At the end of each period, you make provisions for taxes on services received.
The authorities in India require you to remit taxes following a specific procedure. First, you create a remittance challan with a list of the withholding tax items that you are remitting. You then send the challan to the authorities, along with the check. Once the check has been cashed, the bank sends you a bank challan to confirm the payment. You then enter the bank challan in the system.
The system automatically tracks each withholding tax item's remittance challan and bank challan.
When you have remitted the tax, you can print out withholding tax certificates for all taxes that you have withheld, using functions specific to Country Version India.
Before you create your annual returns, you can also check for any customers that have not yet sent you a withholding tax certificate for tax that they have withheld from you.
Again, with receivables, if you make interest payments to your customers, you must also withhold tax on them as appropriate.
Reporting
Country Version India offers a report that you can use to prepare annual returns, and a Withholding Tax Information System for tracking and reporting purposes.
See also: