Tax Deduction At Source

Under Indian Income Tax Act, certain payments such as payments under contracts, rent, interest etc. attract deduction of Income Tax at source. The person responsible for payment has to deduct the tax at source and remit the same periodically to the Government.

To set up a Tax, Click the Tax Deduction (At) Source tab. It will show the Add section as well as listing all taxes already configured.

The data to be provided is based on the Nature of Payment. These are explained

Nature of Payment: This can be Rent, Interest, Commission/Brokerage, Fees for Technical Services etc., which map to the relevant provision under the Indian Income Tax Act, such as 194H, 194J etc.

Residential Status: This can be either Resident or Non-Resident only

Deductee Type: This can be Contractor or Sub-contractor

IT Assessee Type: This could be Individual, Firm, Company etc.

Nature of Work: Select from the list, as may be relevant

Purchase GL Account/Sales GL account: This is ideally the Liability account for TDS, based on the type of expense

Percentage: The rate at which Tax will be deducted

Effective From/Through Dates: The deduction will be applicable only for transactions between these dates. Leave the Through Date blank, as long as the deduction remains in force

Clicking Add will save the setting.

A TDS setting will be activated only when it is linked to a party, in the Party Master