TDS cut by customer

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1

Please if any of you can help me understand
I made a sale invoice of professional fees of 30000
Client paid me 27000
an cut 3000 tds
so payment entry will be of 27000 right
and how will the 3000 accounting work
Because 3000 is not outstanding

Book TDS after purchase invoice booked
2

Hi @DakshKothari18

It depends if its final or non-final. If non-final then the government (at least here in our country) allows you deduct it against your year end corporate tax bill. So you book it as a debit against corporate tax liability

Either in Invoice or in payment you can create the tax (or I think India Compliance app handles this)

3

Yes, payment entry will be ₹27,000, but ₹3,000 is not ignored—it’s treated as TDS receivable.

Accounting treatment:

  • Debit Bank → ₹27,000

  • Debit TDS Receivable → ₹3,000

  • Credit Income → ₹30,000

So ₹3,000 is not outstanding, it’s your asset (adjustable against tax liability later).

For more practical accounting insights, you can also refer to Setindiabiz

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4

Withholding Income tax or tax deducted at source have two dimensions;

1) If you are the buyer deducting tax (withholding tax / WHT) = purchase Cycle

Then the deducted amount is a liability.

  • You deducted tax from the supplier’s payment

  • That amount does not belong to you

  • You must pay it to the government and it is liability

2) If you are the supplier whose tax is deducted = Sales Cycle

Then it becomes your asset.

  • Tax is deducted from your sales

  • You can claim it later (adjustment or refund) and book as tax asset.

There are two ways to book WHT on Invoices;

WHT category has to be set on supplier if tax is going to be deducted on purchases. On the other hand, self bearing WHT can be handled by configuring purchase tax template where tax is going to be expense out due to self bearing nature especially in the case of import purchases.

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5

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You mean to say that I selecte the TDS recievable here right?
But this only allows bank and cash

6

Have tried the deductions and sale template in payment entry the
Ledger posting is wrong

7

Hi @DakshKothari18

In the extra options (right-hand pencil) in taxes and charges section of the payment entry: -

  1. Add or Deduct - Deduct
  2. Type - On Paid Amount
  3. Account Head - TDS Recoverable from Revenue Authorities (Asset)
  4. Tax Rate -10%

Alternatively if it is not recoverable you can write it off as an expense account in the write-off section

Hope it helps

8

If you do this its crediting the bank and then going into the TDS recoverable
Which is wrong.
From debtors it should directly go in TDS recoverable