Set up tax components for the TDS tax type

This article explains how to set up withholding tax components for the Tax Deducted at Source (TDS) tax type. The TDS components are TDS, surcharge, PE-Cess, and SHE Cess. This article also explains how to define the threshold that is used to calculate TDS for each TDS component. Additionally, you can define an exception threshold that is used to calculate TDS for each TDS component.

Follow these steps to set up TDS components.

1. Go to Tax > Setup > Withholding tax > Withholding tax components.

   []

2. In the Tax type field, select TDS to set up withholding tax components for the TDS tax type.

3. On the Action Pane, select New to create a line.

4. In the Withholding tax component field, enter a name for the TDS component.

5. In the Withholding tax component group field, select the TDS withholding tax component group to attach the TDS component to.

6. On the General FastTab, in the Description field, enter a description of the TDS component.

7. On the Action Pane, select Threshold to open Threshold page, so that you can define the threshold that is used to calculate TDS for the TDS component.

8. Use the From date and To date fields to define the period that the threshold is applicable to.

9. On the General FastTab, in the Threshold field, enter the threshold amount that is used to calculate TDS for the TDS component. The tax will be deducted at the source only when the cumulative invoice amount crosses the threshold.

   For example, if the threshold amount is 10,000, TDS is calculated after the cumulative invoice amount exceeds 10,000 (in other words, when it's 10,001 or more).

10. In the Exception threshold field, enter the exception threshold amount that is used to calculate TDS for the TDS component. The tax on an invoice line will be deducted at the source only when the amount crosses the exception threshold.

    For example, if the exception threshold amount is 5,000, TDS is calculated on a specific invoice line if the invoice line amount exceeds 5,000 (in other words, if it's 5,001 or more).

    []

    Note

    The exception threshold amount must be less than or equal to the threshold amount.

    The tax is deducted for a transaction if the transaction amount crosses the exception threshold, even if the cumulative invoice amount doesn't cross the threshold that is specified in the Threshold field.

11. Close the Threshold page to return to the Withholding tax components page.

12. On the Action Pane, select Copy to open the Copy withholding tax components dialog box, so that you can copy the TDS components that were set up for one TDS component group to another TDS component group.

13. In the From field, select the TDS component group to copy the TDS components from. In the To field, select the withholding tax component group to copy the TDS components to.

    Note

    Common TDS components that are attached to both TDS component groups aren't copied.

14. Select OK to copy and create TDS components for the other TDS component group on the Withholding tax components page.

    []

15. Close the page.