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Tax Collected at Source (TCS) in India

Tax Collected at Source (TCS) is the tax payable by a seller, which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller must collect tax from the purchasers. The seller is only responsible for the collection of this tax from the buyer. 

Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued in the form of a laminated card, by the Income Tax Department, to any “person” who applies for it or to whom the department allots the number without an application. PAN enables the Income Tax department to link all transactions of the “person” with the department.  

Processing TCS Calculation 

When you create an FI-CA document, the system calculates the tax collected at source (TCS) considering the following: 

  • The system compares the amount with the threshold defined in Customizing. If the amount is above the threshold, TCS is calculated for the amount that is over the threshold. If the document amount is below the threshold, no TCS is calculated. 
  • The system accumulates the tax base amount and the tax amount including the FI documents created in the FI/LOG components. The accumulation always considers all the documents created in both components, as it cannot be done in the components separately. 

Billing Scenarios:

  • Invoice fully under threshold – TCS is not calculated 
  • Invoice partially above threshold – TCS is calculated for the amount that is over the threshold 
  • Invoice fully above threshold – TCS is calculated for the whole amount 

Header and Item Details 

The data is stored in the following database tables in FI-CA: 

  • FKKID_ACCU_TAX_H (India: Tax accumulation table – header) 

This table stores header data of the accumulated amounts (base amount and tax amount). 

  • FKKID_ACCU_TAX_I (India: Tax accumulation table – details) 

This table stores item details such as business partner, document number, and so on. 

In the FI/LOG component, the data is stored in the following database table: 

  • J_1IG_ACCUMHDR (Sales Accumulation Header) 

The header tables are used to check threshold limit. 

  • J_1IG_ACCUMDTL (Accumulation Details for Sales) 

 

Posting Schemas 

There are two ways in which the TCS can be posted: 

  • Posting immediately to the target TCS GL Account 

TCS is posted immediately after posting the invoice without waiting for the payment  

  • Posting via interim TCS GL Account (Clearing based TCS payment) 

TCS amount is posted to an interim account together with the invoice. Once the invoice is paid by the customer, the TCS becomes payable and can be sent to authorities. 

Prerequisites for Processing Tax Collected at Source 

As a prerequisite for TCS in FI-CA/ISU solution, you need to install TCS functionality in FI/SD. 

See details in Note 2898812 – [WEBINAR] Amendment to Section 206C TCS – Updates and Note 2963124 – FAQ on Tax Collected at Source (TCS).   

To install FI-CA/ISU solution, follow the latest version of Note: 

3004326 – FI-CA India: Composite Note for TCS(Tax Collected at Source)-localization development 

TCS Calculation in IS-U 

The transactions made by our IS-Utilities solution fall under the ambit of TCS. Any sale of goods by IS-Utilities customers exceeding INR 50 Lacs in a financial year is subject to TCS. 

To be able to calculate TCS in Utilities, you must first register the following function modules in transaction FQEVENTS: 

  • Event R433, function module to register is ISU_IN_TCS_EVENT_R433 
  • Event R437, function module to register is ISU_IN_TCS_EVENT_R437 
  • Event R470, function module to register is ISU_IN_TCS_EVENT_R470 
  • Event R999, function module to register is ISU_IN_TCS_EVENT_R999 

For the calculation of TCS, you can then use BAdI in event R999 that contains a function module (ISU_IN_TCS_EVENT_R999) for the calculation of tax collected at source (TCS) for the IS-U invoicesLocated in Customizing for SAP Utilities under Invoicing > Basic Settings > Define Basic Settings for India > BAdI: Calculate Tax Collected at Source (TCS). 

TCS Calculation in SDFI-CA  

It is possible to directly post SD billing document with TCS in FI-CA based on the customer account groups in Customizing 

Prerequisites for TCS calculation: 

  • you are using Sales and Distribution (SD) and Contract Accounts Receivable and Payable (FI-CA) in the same system and the same client 
  • you activated direct posting of SD billing documents in Contract Accounts Receivable and Payable (FI-CA) based on the customer account groups in Customizing 

The calculation of TCS is performed within the SAP Sales and Distribution module and therefore there are some steps and configurations for TCS in the SD module to be performed. The necessary steps are described in Note 2948539 – Corrections to enable Tax Collected at Source in Outgoing Invoices 

While the calculation of TCS is performed in the SD module, the accumulated amount and TCS is saved into FI-CA accumulation tables. 

Enabling Manual Posting 

TCS can also be calculated when posting a manual document (transaction FPE1). 

Follow these steps to enable manual posting with TCS: 

1. Add Business Partner to grouping criteria structure 

To enable TCS accumulation and calculation in transaction FPE1, it is necessary to add field GPART in structure FKKTAX_FPE1_PREP Once you add Business Partner to this structure, the system will be able to consider PAN/AADHAAR/Business Partner number when calculating TCS in transaction FPE1. 

To do that, go to transaction SE11 and enter FKKTAX_FPE1_GRP in field Data Type. Choose the “Display” push button to see the list of components of structure FKKTAX_FPE1_GRP. 

Click on the “Append Structure” button and enter the name of your structure.  

Add field GPART to this structure and activate it. 

The field GPART should now be added in the structure FKKTAX_FPE1_PREP (you can check that in transaction SE11). 

2. Apply all Notes listed in composite Note 3004326 FI-CA India: Composite Note for TCS (Tax Collected at Source) – localization development

Please note that if you post manual documents in foreign currencies: 

  • No rounding method for TCS is called for tax amount in local currency 
  • You can change the Translation Date on the document header to determine the exchange rate, which is to be used for translation, but it is not possible to change the exchange rate directly on item level 

Summary

To check information and basic configuration for TCS, check SAP Note 2976843.

To implement the solution for TCS in FI-CA/IS-U, check the latest version of SAP Note 3004326.

As a prerequisite for TCS in FI-CA/ISU solution, you need to install TCS functionality in FI/SD:

SAP Note 2898812 – [WEBINAR] Amendment to Section 206C TCS – Updates

SAP Note 2963124- FAQ on Tax Collected at Source (TCS)

There is also a webinar for IS-U customers available – link to the Media Share.

 

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