1. Country-Specific Features
  2. India Help Topics
  3. India Localization SuiteTax Engine
  4. Tax Deduction at Source
  5. Setting Up TDS
  6. Creating TDS Tax Rate Rules
  7. Tax Deduction at Source

Tax Deduction at Source

The Tax Deduction at Source (TDS) tax rate rule is used to calculate basic TDS on transactions. All TDS tax rules use the default TDS tax types and codes included with the India Localization SuiteTax Engine SuiteApp.

Each TDS tax rate rule is a unique combination of section code, vendor type, effective from date, and valid until date. If there are transactions for a TDS rule, you can’t edit any fields except the Valid Until field.

When you create a TDS tax rate rule, consider the following:

To create a TDS tax rate rule:

  1. Go to Setup > India Localization > TDS Tax Rate Rules.

  2. Click the Tax Deduction at Source subtab.

  3. Click New Tax Deduction at Source.

  4. Enter a unique name for the TDS tax rule.

  5. In the Section Code field, select the section code for this rule.

  6. In the Vendor Type field, select the vendor type for this rule.

  7. In the Effective From field, enter the start date for the tax rule.

  8. In the Valid Until field, enter the end date for the tax rule.

  9. Enter the tax rate for this rule.

  10. In the Threshold Basis column, set the threshold level only if the section code has a threshold basis:

    1. Year – TDS is calculated when the total bill amount reaches or exceeds the yearly threshold. Until then, the SuiteApp uses the document threshold amount to calculate TDS.

      1. Threshold Amount– Enter the yearly threshold amount.

      2. Retrospective – If you check the box, the rule uses retrospective tax calculation. If you clear the box, it uses non-retrospective tax calculation. By default, the box is checked. You can’t use non-retrospective calculation if both year and document thresholds apply to the rule.

    2. Document– TDS is calculated when a bill amount is equal to or greater than the document threshold.

      By default, retrospective calculation is set when you use a document threshold basis.

      1. Threshold Amount – Enter the document threshold amount.

  11. Click Save.

TDS Calculation Based on Tax Rule

TDS is calculated using the tax rule that applies to the bill. You can set up tax rules in the following ways:

  • Tax rule without threshold basis– If there’s no threshold, TDS is calculated using the section code, vendor type, effective period, and tax rate.

  • Tax rule with year threshold basis– If a year threshold is set, TDS is calculated using the section code, vendor type, effective period, tax rate, and threshold basis.

    When the total bill amount is equal to or greater than the year threshold, TDS is calculated on the bill.

    • If TDS calculation is retrospective, TDS is applied to the whole accumulated bill amount after it exceeds the year threshold.

    • If TDS calculation is non-retrospective, TDS is applied only to the amount above the year threshold.

  • Tax rule with document threshold basis – If a document threshold is set, TDS is calculated using the section code, vendor type, effective period, tax rate, and threshold basis.

    When a bill amount is equal to or greater than the document threshold, TDS is calculated on that bill and all following bills. After the document threshold is reached, the SuiteApp ignores the threshold for subsequent bills associated with the rule.

  • By default, tax calculation is retrospective when you use a document threshold.

  • Tax rule with both document and year thresholds – If both thresholds are set, TDS is calculated using the section code, vendor type, effective period, tax rate, and threshold basis.

    If a vendor bill uses a rule with both thresholds, TDS is calculated based on whichever threshold is triggered. TDS calculation depends on the following scenarios:

    • If the bill amount reaches the document threshold first, TDS is calculated on that bill using the document threshold. The SuiteApp keeps using the document threshold for subsequent bills until the year threshold is reached. After a bill reaches the year threshold, TDS is calculated using the year threshold for that bill and all following bills.

    • If both thresholds are reached on a bill, TDS is calculated using the year threshold.

Related Topics

General Notices