Withholding tax for sales
Withholding tax or Tax collected at source:
In India tax has to be collected at source (by the seller) from buyer on specific items like alcoholic liquor, tendu leaves, timber, other forest produce, on mining/quarrying & scrap. Withholding tax rate or TCS rate is generally 1% – 5% varying from product to product. We will see below process configuration for TCS on sale of affected products by creating a provision for the same in sales pricing procedure.
1. First we will create two condition types say JTCS for charging TCS in sales order & JWTS for posting TCS amount in FI with an offsetting entry. Here, JWTS will be 100% value of JTCS and will be posted from sales order with accrual key say JTS.
3. Assign withholding tax type in customer master as under:
NOTE: Create condition records for JTCS – 1% with withholding tax code T1 & JWTS – 100% with tax code T1 for your key combination in VK11.
Tax collected at source entries in accounting document from sale of scrap will be as under:
Please note Extended withholding tax has to be activated for the company code and relevant FI configuration is required before use of withholding tax in Sales.
FI Configuration is as under:
- Define Withholding Tax Keys
After including country code (IN) in basic settings – check withholding tax countries, a key for withholding tax has to be created. Enter official key 206C for withholding tax – Tax collected at source
Double-click and choose configuration for T1. Your choice of base amount & rounding rule here have to be backed up with subsequent configuration for the same.