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Withholding Tax
Tax that is charged at the beginning of the payment flow in some countries. Usually, the party that is
subject to tax does not pay the withholding tax over to the tax authorities himself.
When a customer that is authorized to deduct withholding tax pays invoices from a vendor subject to
withholding tax, the customer reduces the payment amount by the withholding tax proportion. Thecustomer then pays the tax withheld directly to the appropriate tax authorities (see diagram).
Withholding Tax
Use
To calculate, pay, and report the withholding tax, the SAP System provides two functions:
Classic Withholding Tax (all Releases)
Extended Withholding Tax (from Release 4.0)
For each company code, you can decide whether you want to use classic or extended withholding tax. Since
the extended withholding tax option includes all the functions of classic withholding tax, SAP recommends
the use of extended withholding tax (see below: Table of Classic and Extended Withholding Tax
Functions).
If you have previously used classic withholding tax, and now wish to change over to extended withholding
tax, you must first convert the withholding tax data in all the company codes affected.
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Classic and Extended Withholding Tax Functions
Individual Functions Classic
Withholding
Tax
Extended
Withholding Tax
Withholding tax on outgoing payment X X
Withholding tax on incoming payment XWithholding tax posting at time of payment X X
Withholding tax posting at time of invoice X
Withholding tax posting on partial payment X
Number of withholding taxes for each document item Max. 1 Several
Withholding tax base: Net amount X X
Modified net amount X
Gross amount X X
Tax amount X
Modified tax amount X
Rounding rule X
Cash discount considered X
Accumulation X
Minimum/maximum amounts and exemption limits XNumber assignment on document posting (certificate
numbering)
X
Calculation formulas X X
Country Version India comes ready configured with all the settings you need to track and remit
withholding taxes under the following sections of the Income Tax Act, 1961:
Payments to contractors and subcontractors (Section 194 C)
Insurance commission (Section 194 D)
Rent (Section 194 I)
Fees for professional or technical services (Section 194 J)
Interest other than interest on securities (Section 194 A) only supported in the Extended
Withholding Tax solution
The key concept in extended withholding tax is the distinction between withholding tax type and
withholding tax code.
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Check Withholding Tax Countries
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Check Withholding Tax Countries
It will display another screen click on so it will display the following screen:
Define Withholding Tax Type for Invoice Posting
PATH: SPROFinancial Accounting (New) Financial Accounting Global Settings (New)
Withholding TaxExtended Withholding TaxCalculationWithholding Tax TypeDefine
Withholding Tax Type for Invoice Posting
Database Table: T059P, T059U
W/Tax type P1
Description
Base Amt Gross Amount
Rounding Rules With holding Tax Common Round
Post W/Tax Amt Select
Accum Type Per Year Starting with Month
Control Data Select W/Tax Base Amount
Select W/Tax AmountNo Cert Numbering
Region APDefine Min/Max
Amounts
Base Amount Select W/Tax Code Level
W/Tax Amount Select W/Tax Code Level
Except W/Tax Type and description all settings are same for other withholding tax types.
W/Tax typeDescription Education Cess on TDS
Base Amount Tax Amount
Select Inherit Base
Accumulation Type No Accumulation Type
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W/Tax type
Description Higher Education Cess on TDS
Base Amount Tax Amount
Select Inherit Base
Accumulation Type No Accumulation Type
Define Withholding Tax Keys
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings Define Withholding Tax Keys
Database Table: T059O, T059OT
Official W/Tax Key :
Name :
Check Recipient Types
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings Check Recipient Types
Database Table: T059C, T059D
A system object that you use to classify payment recipients as legal persons or natural persons, for the
purposes of withholding tax reporting.
For each withholding tax type, create two entries as follows:
Recipient Type Text
CO Companies
OT Others
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Country Key IN
Withholding TaxType
Recipient Type
Text
Companies Others
Check Income Types
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings Check Income Types
Database Table: T059E, T059G
Country:IN
Income Type: 001 Commission
002 Rent003 Contract Amount
Define Business Places
PATH: SPRO Cross-Application Components General Application Functions Nota fiscal CNPJ
Business Places Define Business Places
By the above screen it will display the following window:
Company Code:
click on so it will display the following screen:
Business Place :
Address :
Define Section Codes
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings South Korea Define Section Codes
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A system object that represents the organizational unit responsible for collecting and remitting withholding
tax, as identified by a TAN. Each company can have more than one TAN, so in the SAP system, a
company code can also have multiple section codes.
When you post a document with a withholding tax item (for example, a vendor invoice or a credit memo),enter the section code in order to make sure that the tax item is assigned to the correct TAN.
Company Code:
Select New Entries
Section Code :
Business Place :
Address
Define Business Places
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings India Define Business Places
New Entries Button:
Company Code :
Section Code :
Name1 :
Assign Factory Calendars to Business Places
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings India Assign Factory Calendars toBusiness Places
In the display another screen click on so it will display the following screen:
Company Code :Section Code: ;
Factory Calendar :Rule :
Maintain Tax Due Dates
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Basic Settings IndiaMaintain Tax Due Dates
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In this IMG activity, you maintain the various tax due dates. Because due dates can differ, depending on the
withholding tax type and recipient type, you can maintain the dates at this level. Make sure that you
maintain entries for all the recipient types that you use.
For each permutation of official withholding tax key and recipient type, specify when the tax has to beremitted.
Select New Entries Button
Country :
Off.WH Tax Key :
Receipent Type :No of Days until tax due date :
Define Withholding Tax Codes
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax CalculationWithholding Tax Codes Define
Withholding Tax Codes
Database Table: T059Z, T059ZT
Country Key : IN
Withholding Tax Type :
W/Tax Code :
Off.W/Tax Key :Description : TDS On Base Amount
Percentage Sub Tax :
Post.Indic :W/Tax Rate :
Region :
Income Type :
click on next entry button
W/Tax
Type W/Tax Code
Off.W/Tax
Key Description
Percentage
Subj Tax Post.Indic W/Tax Rate Region
Incom
Type
Education
cess on TDS 100 1 2HigherEducationCess on TDS 100 1 2
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Portray Dependencies Between Withholding Tax Types
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax CalculationWithholding Tax Base Amount Portray
Dependencies Between Withholding Tax Types
Database Table: T059P, T059U
Country Key : IN
Define Min/Max Amounts for Withholding Tax Codes
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax CalculationMinimum and Maximum Amounts
Define Min/Max Amounts for Withholding Tax Codes
Database Table: T059MINMAX
Country Key : IN
click on so it will display the following screen:
Withholding Tax Type :W/Tax Code :
Currency :
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Valid From :
Maximum Base Amount :
Now click on next entry button for another entry as below:
Withholding Tax Type :
W/Tax Code :Currency :
Valid From :
Maximum Base Amount :
Assign Withholding Tax Types to Company Codes
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Company Code Assign Withholding Tax Types to
Company Codes
Database Table: T001WT
It will display a screen click on so it will display the following screen:
CoCd W/Tax Type Rec Type W/Tax Agent
W/TaxObligated
From
W/Tax
Number
Activate Extended Withholding Tax
PATH: SPRO Financial Accounting (New) Financial Accounting Global Settings (New)
Withholding Tax Extended Withholding Tax Company Code Activate Extended Withholding Tax
Database Table:
click on
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Company Code :
Ext.W/tAx : Select the check box
Creation of required G/L a/cs for Withholding Tax
The following 4 G/L account creates with following PATH:
PATH: AccountingFinancial AccountingGeneral LedgerMaster RecordsG/L
AccountsIndividual ProcessingFS00 - Centrally
G/L a/c
Number
Compan
y .Code
Acc.
Group
P&L
Statement
acct /
Balance
Sheet
Account
Short
Text /
G/L Acct
Long
Text
Only
balance
in Local
Currency
Open item
Management
Line Item
Display
Sort
Key
Field
Status
Variant
Pos
Automa
lly on
Liabilities
Balance
Sheet
Account
TDS a/c X X X 001 G001 X
Liabilities P&LEducation
Cess a/cX 001 G001 X
Liabilities P&L
Higher
EducationCess a/c
X 001 G001 x
Define Accounts for Withholding Tax to be Paid Over
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPostingAccounts for Withholding TaxDefine Accounts for
Withholding Tax to be Paid Over
Chart of accounts :
Select withholding Tax Code
Select withholding Tax Type and Save
W/Tax Type W/Tax Code GL Account
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In the above screen we assign G/L accounts with respective W/Tax type and W/Tax code to transaction key
WIT.
Specify Document Type (Accounts Payable)
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting India Remittance Challans Document Types Specify
Document Type (Accounts Payable)
Database Table: J_1IEWT_CUST
click on so it will display the following screen:
Co Cd :
Doc Type : SA
Save the activity and back to SPRO screen.
Remittance Challan
A document, in India, that you present to a bank, when depositing any form of withholding tax that you
have retained. The challan states how much tax is being deposited. A separate challan is required for each
form of withholding tax.
Maintain Number Groups
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting India Remittance ChallansMaintain Number Groups
Database Table: J_1IEWTNUMGR_N
Click on
Company Code :
Section Code :
Off.W/Tax Key :
Number Group :
Assign Number Ranges to Number Groups
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting India Remittance Challans Assign Number Ranges toNumber Groups
Click on so:
Number Group :
Intr NR :
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Maintain Number Ranges
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting India Remittance ChallansMaintain Number Ranges
By the above PATH it will display an screen click on button so it will display the followingscreen:
Group Menu -- > Insert
Company Code :
Maintain Number Groups and SAPscript Forms
In this IMG activity, you specify which SAP script forms you want to use to print the withholding tax
certificates. These forms are used when you:
Print withholding tax certificates for vendors
Print withholding tax certificates for customers
Country Version India comes with a form, J_1IEWTCERT, which you can use as the basis for creating
your own forms.
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting IndiaWithholding Tax Certificates for Vendors and
CustomersMaintain Number Groups and SAPscript Forms
It will display a screen click on so it will display the following screen:
Company Code :
Sec Code :Off.W/Tax Key :
Form : J_1IEWTCERT
Number Grp :
Assign Number Ranges to Number Groups
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PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting IndiaWithholding Tax Certificates for Vendors and
Customers Assign Number Ranges to Number Groups
It will display a screen click on so it will display the following screen:
Maintain Number Ranges
PATH: Financial Accounting (New) Financial Accounting Global Settings (New)Withholding
TaxExtended Withholding TaxPosting IndiaWithholding Tax Certificates for Vendors and
CustomersMaintain Number Ranges
By the above PATH it will display an screen click on button so it will display the followingscreen:
Maintain Company Code Settings - Excise Registrations
PATH: SPTO Logistics - General Tax on Goods Movements India Basic SettingsMaintain
Company Code Settings
It will display a screen click on so it will display the following screen:
CoCd :
Assign Withholding Tax to Vendor Master Data
PATH: Accounting Financial Accounting Accounts PayableMaster RecordsMaintain
Centrally XK02 Change
Vendor No :
CoCd :
Pur.Org :
Select Withholding Tax Check Box
W/Tax Type W/Tax Code Liable Rec Type
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Posting Vendor Invoice
PATH: AccountingFinancial AccountingAccounts PayableDocument EntryF-43 - Invoice
GeneralTransaction Code: F-43
Report
PATH: AccountingFinancial AccountingGeneral LedgerAccountFBL3N - Display/Change Line
Items.
Transaction code: FBL3N
In the displayed select required all tax relevant G/L a/c number s and executive the screen it will display the
following report screen
Create Remittance Challan
PATH: AccountingFinancial AccountingAccounts PayableWithholding TaxIndiaExtended
Withholding TaxRemittance of Withholding TaxJ1INCHLN - Create Remittance Challan
Transaction code: J1INCHLN
By above PATH it will display the following screen:
CoCd` :FY :
Bus Place :
Posting Dt :
Section :
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Rec Types :
Doc Date :
Posting Date: :
Bank Account :
Bus Area :
Report
PATH: AccountingFinancial AccountingGeneral LedgerAccountFBL3N - Display/Change Line
Items.
Transaction code: FBL3N
In the displayed select required all tax relevant G/L a/c number s and executive the screen it will display the
following report screen
In the above screen you can view all open items of taxes are cleared.
Enter Bank Challan
PATH: AccountingFinancial AccountingAccounts PayableWithholding TaxIndiaExtended
Withholding TaxRemittance of Withholding Tax J1INBANK - Enter Bank Challan
Transaction code: J1INBANK
1) Company code,2) Fiscal year,
3 Challan clearing number
4) Bank challan number (give any new number that ma be alphanumeric),
5) Bank challan date,
6) Bank key (your house bank key).
Now click on Executive button so it will display the following information:
Bank Challan Update:
J1INBANK - Enter Bank Challan
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Certificates Print
PATH: AccountingFinancial AccountingAccounts PayableWithholding TaxIndiaExtended
Withholding Tax Certificates J1INCERT - Print
Transaction code: J1INCERT
By above PATH it will display the following screen:
In the above screen:
1) Company code 6) Bank Challan Numbers
2) Fiscal Year 7) Bank Challan Dates
3) Business Place / Section code 8) Vendors4) Section 9) Certificate Date
5) Posting dates 10) Signatory
11) Designation
12) Place of Printing
.
View Maintainance : SM30
J_1IEWTNUMGR_1 - Number Group for Internal Challan Numbers
J_1IEWTNUMGR_N -
J_1IEWT_CERTNO
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J_1IEWT_CERTNO
J_1IEWTNUMGR_N
J_1IEWTNUMGR_1
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