India
Purpose
This country version is designed for use by businesses with operations in India. As well as the generic SAP system functions, it comprises functions designed for laws and business practices particular to India, and a
country template to help you customize the system according to local requirements.
This documentation explains how the country-specific functions work and what Customizing settings are made by the country template. It does not cover the generic functions, which are described in the rest of the SAP Library.
Features
Country-Specific Functions
Most of the country-specific functions for India relate to Financials and Logistics. The main areas are as follows: • Excise duty and the central value-added tax system (CENVAT)
• Withholding tax (also known as tax deducted at source)
• Sales tax
• Maintenance and printing of statutory excise registers
All of the menu paths given in this document are based on the India Localization role, with the exception of functions in withholding tax, whose menu paths are given from the SAP Easy Access menu.
Country Template
To allow you to customize your Indian company codes more quickly, you can use the Indian country template in the Country Installation Program.
Financial Accounting (FI)
Purpose
The Financial Accounting (FI) component covers the most important laws and business practices specific to India. The following documentation describes these aspects of the component.
Features
Country-Specific Functions
Country Version India comes with a large number of additional functions for withholding taxes. The customer and vendor masters have been enhanced to store data only used in India. An extra report is also provided for
depreciating assets according to the Income Tax Act.
Country Template
The country template for India comes with:
• Sample settings for calculating and posting taxes
• A chart of accounts and financial statement version
• Sample settings for asset depreciation
Taxes (FI-AP/AR)
Purpose
The Taxes component covers the most important laws and business practices specific to India. The following documentation describes these aspects of the component. For generic information about Taxes, see Taxes (FI-AP/AR).
Features
Country-Specific Functions
Country Version India uses the standard functions for calculating and collecting withholding taxes. However, both Classic Withholding Tax and Extended Withholding Tax come with additional functions for tax remittance, journal vouchers, creating withholding tax certificates, and preparing annual returns.
If you want to handle excise duties, you must post the excisable transactions using the Materials Management (MM) and Sales and Distribution (SD) components. The system calculates the excise duty in these components and creates the appropriate line items in Financial Accounting (FI). However, if you only want to handle
withholding taxes, you can use FI on its own.
Country Template
The country template for India comes with settings for calculating and posting withholding taxes, and account determination settings for posting excise duty.
Excise Duty
Use
The SAP system automatically calculates excise duties in Materials Management (MM) and in Sales and Distribution (SD), and posts them in Financial Accounting (FI).
The system covers all types of excise duty, all of which need to be calculated and reported separately: • Basic excise duty (BED)
• Special excise duty (SED)
• Additional excise duty (AED)
• National calamity contingency duty (NCCD)
• Cess
• Education cess
• Countervailing duty
• Additional duty of customs
Features
The system of excise duties is complex, and differs from the generic functions for taxes on sales and purchases in a number of ways:
• The rate of duty on a single material can vary according to which chapter ID it is listed under.
• You cannot offset all excise duty on inputs against outputs.
Depots cannot offset any input duties at all. Manufacturing plants can only offset input duties if they can
show that the input materials are used to produce output materials.
• You have to record all excise duty (inputs and outputs) in excise registers.
• Your company may only be entitled to offset a portion of the duty on inputs against duty on outputs.
• Companies that qualify as small-scale industries can levy excise duty on outputs at reduced rates, so if you
purchase materials from these companies, you must calculate a different rate of excise duty.
Excise Determination
MM comes with two ways of determining excise duties (and sales taxes) on input materials: formula-based excise determination and condition-based excise determination. The system calculates excise duties using a tax
procedure.
SD also supports formula-based and condition-based excise determination, but in SD, the system calculates the taxes using a pricing procedure, not the tax procedure (see Pricing).
You have to remit the excise duty that you have collected to the central excise authorities. The law requires you to remit excise duty twice monthly: for the first half of any given month (1–15 inclusive) and from 16 to month-end. In each case, you are allowed five days to remit the excise duty. Country Version India offers a report to help you do just that (see Remittance of Excise Duty Fortnightly).
A small number of transactions have to be remitted on the same day (see Other Outward Movements). In addition, the system allows you to prepare printouts of the various excise registers for the tax authorities.
Partial CENVAT Credit
Use
In some industries, businesses are only allowed to set off a portion of their input excise duty against output duty. In this case, the remainder of the duty is added to the material value.
Activities
Customizing
If any of your excise registrations are only entitled to claim partial CENVAT credit, set the indicator in Customizing for Logistics – General, by choosing Taxes on Goods Movements → India → Basic Settings → Maintain Excise Registrations.
Configure separate tax codes that split the excise and post some as tax and add the rest to the material price.
Day-to-Day Activities
The portion of the excise duty that is added to the material value is displayed in the excise invoice, along with the CENVAT credit. This amount is added to the inventory value when you post the goods receipt.
Remittance of Excise Duty Fortnightly
Use
You use this report to calculate how much excise duty you must remit to the authorities. Legislation requires you to remit excise duty twice monthly: for all the goods issues in the first half of any given month (1–15 inclusive) and from 16 to month-end. In each case, you are allowed five days to remit the excise duty.
Once the report has determined how much you have to pay, it allows you to specify where the money should be paid from – whether it should be deducted from the CENVAT credits that you have accumulated, or whether it should be deducted from the personal ledger account (PLA).
Irrespective of which date you execute the report on, you can only utilize CENVAT credits posted up until the 15th or the last day of the month as the case may be.
Prerequisites
You have:
• Customized the system so that when you create an excise invoice for a sale, the system automatically
debits the excise to a CENVAT clearing account
• Made the settings in Customizing for Logistics – General, by choosing Taxes on Goods Movements →
India → Business Transactions → Utilization
Features
To access the report, on the SAP Easy Access screen, choose Indirect Taxes → Sales/Outbound Movements → Fortnightly Payment.
Selection
On the selection screen, enter data as required:
• Organizational data (in the General data group box)
• Posting date for the CENVAT payment, if it is different from the run date
• The period to be covered by the report (for example, 1–15 January)
If, for any reason, you want to select an excise invoice individually, you can do so. Any entry in the
Period field will be disregarded.
To display a list of all the excise invoices whose excise duty you have not yet remitted, choose Display
pend. invoices.
To display a list of only the excise invoices for a given period, enter the period in the Period fields,
select Select pending inv. for period, and choose Display pend. invoices. You can also print the list
of pending invoices.
To display the last date when tax was remitted, choose Display last util. date (Display last utilization
date).
Output
For each sort of excise duty, the system shows you:
• How much you have to remit (Amounts payable group box)
• How much credit you have at your disposal on the appropriate CENVAT account (Available balances)
This figure is equal to the credits on the CENVAT account less the minimum balance.
• How much credit you have on the CENVAT accounts (G/L account balances)
You now have to specify which accounts can be used to utilize the duty amount. In the Balance Utilization group box, the system proposes how much money should be taken from which accounts. You can overwrite these fields if you want, and choose to refresh the display.
For a list of excise invoices that are considered for the CENVAT payment, choose Display excise invoices. You can print the list and use it as an annexure.
When you have finished, save your entries. The system then: • Creates an accounting document that:
Credits the CENVAT clearing account to remove the excise duty owed
Debits the accounts from which the excise duty is to be paid
• Updates the Updates the Part II register
Value Added Tax (VAT)
In India, VAT has been levied in certain states from April 1, 2005. VAT is levied instead of the Local Sales Tax (LST). VAT also replaces other taxes such as, turnover tax, surcharge, additional surcharge.
Prerequisites
You can configure the following tax procedures:
• For Condition-Based Excise Determination, configure the tax procedure TAXINN. For more information
about TAXINN, see Configuration of Tax Calculation Procedure TAXINN.
• For Formula-Based Excise Determination, configure the tax procedure TAXINJ. For more information
about TAXINJ, see Configuration of Tax Calculation Procedure TAXINJ.
Features
The essence of VAT is that you can set off the input tax against the tax paid earlier. VAT is based on the value addition to the goods, and your VAT liability is calculated by deducting input tax credit from tax collected on sales during the payment period (say, a month).
You have purchased input worth INR 1,00,000 and your sales are worth INR 2,00,000 in a month, and
input tax rate and output tax rate are 4% and 10% respectively, then input tax credit/set-off and
calculation of VAT will be as follows:
●
Input purchased within the month = INR 1,00,000
●
Output sold in the month = INR 2,00,000
●
Input tax paid = INR 4,000
●
Output tax payable = INR 20,000
●
VAT payable during the month after set-off/input tax credit = INR (20,000
– 4,000) = INR 16,000
The excise invoice that you capture contains one of the following:
● VAT Number – If your buyer belongs to a state where VAT is levied, VAT Number has to be printed on the excise invoice.
● Bill of Sale Number - If your buyer belongs to a state where VAT is not levied, Bill of Sales Number has to
be printed on the excise invoice.
During billing, the system generates the VAT number if the VAT Registration number is maintained in customer master in the Tax Code 2 field. Else, the system generates a Bill of Sale number.
These numbers have to printed serially and separately for Bill of Sale, VAT invoice, credit and debit notes. You can do this using the Official Document Numbering.
Configuration for Official Document Numbering
Purpose
Official Document Numbering is used to to print the numbers serially and separately for Bill of Sale (BOS), Value Added Tax (VAT) invoice, credit and debit notes.
Process Flow
Cross-Application Components → General Cross-Application Functions → Cross-Cross-Application Document Numbering → Taiwan.
Define Business Places for different plants.
Assign Business Place to Sales Office.
Maintain different document classes to generate different number ranges, for example, B for Bill of
Sale, V for VAT Invoice.
Assign the document class for the VAT and BOS to the Document Type.
Maintain the Number Group.
Maintain the Number Ranges for the Number Group.
Assign the Number Range to a combination of Business place, Document Class and Number Group.
Service Tax
Use
This is a tax that is levied on the services rendered. It is applied on the total price of the service.
Prerequisites
In addition to the standard Implementation Guide (IMG) settings for taxes on service tax, you must also have maintained the tax registration numbers of your vendors, customers and your own plants.
If there are multiple tax registration numbers, you should have separate account postings to different
General Ledger Accounts based on service registration number. You can do this provided you have
maintained a separate tax code for each service registration number. To do this, for every service
registration number, you should define separate General Ledger Accounts for service tax and
education cess on service tax.
Features
Service tax has the following features:
• It is charged at 12% on the price of the service rendered.
• An education cess of 2% is applicable on the service tax.
• This is a deferred tax. Only the amount of service tax that is actually received (credits) by the customer can
be offset against the tax payable.
The interim General Ledger Account contains the total service tax that you have to receive. The final
General Ledger Account contains only the actual amount that you have received. You can take credit
for only the amount in the final General Ledger Account.
• Service tax can be used to set off excise duty paid by you. Additional duty of customs cannot be used to
set off the service tax paid by you.
• This tax is payable to the Central Government.
Example
The price of the service is INR 10,000. Service tax that is applicable is INR 1,200. Education cess is INR 24.
Total amount to be received by you is INR 11,224. The system updates the interim General Ledger Account with this amount.
Now, assume that the customer makes a part payment, out of which INR 500 is against service tax. You have to manually update the final General Ledger Account with this amount.
You can offset only INR 500 against the payables in that month.
Sales Tax
Use
This is a tax levied on the sale of a product. It is applied on the gross price of goods, inclusive of excise duty.
Prerequisites
In addition to the standard Implementation Guide (IMG) settings for taxes on sales and purchases, you must also have maintained the tax registration numbers of your vendors, customers, and your own plants.
Furthermore, if the state legislation allows you to offset input local sales tax (LST) against output LST, you must also have defined this (see Material Master (Excise Data)).
Features
There are two types of sales tax. Interstate sales (for example, between Karnataka and Tamil Nadu) are subject to central sales tax (CST). The tax rate is the same throughout the country. Intrastate sales, on the other hand, are subject to local sales tax (LST), which differ from state to state. The system handles these using tax jurisdiction codes.
A percentage of input LST can be deducted against output LST, depending on what percentage of goods you have purchased in the state in question.
The system calculates the sales taxes automatically, when you enter the tax codes. A report is also available that tells you how much sales tax you have paid and collected.
Sales Tax Register
Use
You use this report to see how much tax has been accumulated under the various tax codes and tax jurisdiction codes for a combination of conditions.
You can also report how much input sales tax has been set off against the outputs. This report also can serve as the basis of determining your local sales volume and central sales volume.
Features
To access the report, on the SAP Easy Access screen, choose Indirect Taxes → Registers → Sales Tax → Sales Tax Register.
Selection
On the selection screen, fill out the following data: • Organizational data
Specify which documents you want the report to cover. If you need more selection criteria, use the
dynamic selection fields.
• General selection
Specify which taxes you want the report to cover. You can report either central sales tax or local sales
tax by choosing a combination of ship-from and ship-to locations.
If you want to restrict the selection to specific locations, fill out the Ship-from and Ship-to fields.
Withholding Tax
Use
Country Version India comes ready configured with all the settings you need to track and remit withholding taxes under the following sections of the Income Tax Act, 1961:
• Payments to contractors and subcontractors (Section 194 C)
• Insurance commission (Section 194 D)
• Rent (Section 194 I)
• Fees for professional or technical services (Section 194 J)
• Interest other than interest on securities (Section 194 A) (only supported in the Extended Withholding Tax
solution)
Features
Country Version India offers you two solutions for handling withholding tax (also known as tax deducted at source or TDS). You can either use the Classic Withholding Tax solution or the Extended Withholding Tax solution.
If you are installing the SAP system for the first time, we recommend that you use the Extended
Withholding Tax solution. Before you decide one way or the other, however, you must give careful
consideration as to whether Extended Withholding Tax covers your requirements. If you start working
with this solution and it transpires that it does not cover your needs, SAP does not offer a strategy for
migrating to Withholding Tax.
Taxes withheld under each section are treated differently with regard to the time limits for remitting tax to the authorities, providing the taxpayer with a withholding tax certificate, and filing an annual return. In addition, the formats for the withholding tax certificates and the returns also differ.
The Income Tax Act requires you to calculate taxes as soon as you enter an invoice. However, if you make a down payment to a vendor before you have received an invoice from it, you withhold tax on the down payment. Then, once the invoice arrives, you clear the down payment against it.
When you prepare your annual returns, the act also requires you to make provisions for taxes on services received but not yet invoiced.
Country Version India
Country Version India complements the generic Classic Withholding Tax and Extended Withholding Tax solutions with additional functions that meet the needs of the Income Tax Act. These functions allow you to:
• Ensure that you remit taxes within the due date
• Track and report withholding tax surcharges separately
• Adjust withholding taxes when you clear a down payment against an invoice
• Calculate withholding tax on provisions
Classic Withholding Tax
Use
Under the terms of the Income Tax Act, you are required to calculate withholding tax (tax deducted at source, or TDS) when you post a vendor invoice. The system calculates withholding tax at the time of payment. To handle this difference in the calculation of the tax and to incorporate additional requirements, such as withholding tax certificate printing and annual returns, additional functions are provided.
Features
The withholding tax for an invoice or a down payment is calculated at header level. That is, only one withholding tax code can be used for a down payment or invoice. This implies that an invoice cannot contain items with different withholding tax rates. It can, however, contain one or more items with the same withholding tax rate and one or more items with no withholding tax. This can be handled by specifying the base amount on which
withholding tax is to be calculated. On account of calculation at header level, companies have to instruct their suppliers not to include items with different withholding tax rates in a single invoice, but issue separate invoices for different tax rates.
The system also allows you to print TDS certificates for vendors, and to reprint or cancel them if necessary. In addition, you can also prepare TDS returns.
Recipient Type
Definition
A system object that you use to classify payment recipients as legal persons or natural persons, for the purposes of withholding tax reporting.
Use
Customizing
Define the recipient types in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Withholding Tax → Basic Settings → Maintain Types of Recipient.
Create two entries as follows:
Master Data
When you enter the withholding tax types and codes in the vendor master, enter CO or OT in the Recipient Type field, depending on whether the vendor is a legal person or a natural person.
Reporting
Recipient type Text
CO Companies
The annual returns separate the information about taxes withheld on legal persons and on natural persons.
Calculate Tax Deducted at Source
Use
You use this program to calculate withholding tax on vendor invoices.
It you have already posted a down payment for an invoice and withheld tax on it, the system automatically takes the tax already paid into account.
To access the program, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Tax Deduction at Source: Classic.
Prerequisites
You have already entered the invoices and the down payments.
Features
Selection
On the selection screen, enter the following data:
Run Program in Test Mode
We recommend that you first run the program in test mode, then once you are satisfied with the results, in update mode.
Process Invoices Only
Select this if you want to post TDS for a specific invoice. It speeds up the response time.
TDS Date
This is the posting date that the system enters in the TDS document (update mode only).
Output
The system displays a list of invoices and specifies whether there are any down payments to be cleared against them.
Activities
In the output list, you can clear an invoice against a down payment as follows:
1. Position the cursor on the invoice that you want to clear the down payment against and choose . 2. Select the down payment that you want to clear.
The system:
Creates an accounting document to clear the down payment and reduce the vendor liability
Recalculates the withholding tax base amount and the withholding tax amount, based on the amount of the
down payment against which the invoice was cleared.
You can also clear invoices against down payments by first taking a list of all the invoices listed above by choosing . You can then clear them by choosing Financial Accounting → Accounts Payable → Document Entry → Down Payment → Clearing, and then clear each invoice one by one. By clicking on the document numbers, you can display the document of the TDS posting.
You will have to make a manual FI posting to transfer the amounts from the respective withholding tax accounts (as defined in the withholding tax line items) to the TDS government payable vendor account. To make the payment to the TDS government payable vendor account, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Document Entry → Outgoing Payment → Post.
Handling of Credit Memos
Use
This procedure shows you what happens if you post a credit memo against a vendor invoice. If you have already remitted the TDS from the invoice, the credit memo against that invoice is not considered at all for processing. Otherwise, the system calculates TDS for the amount stated on the credit memo and debits it from the TDS payable account.
Procedure
1. You post a credit memo, entering with the invoice number as the reference number. 2. You post the TDS in test mode.
The system displays a message, telling you to run the program in update mode. 3. You post the TDS in update mode.
The system makes the appropriate posting and displays the number of the credit memo along with the TDS posting document.
Making Down Payments on Invoices Where TDS Has
Been Calculated
Use
If you have withheld TDS on an invoice but not yet remitted it to the government, and the invoice needs to be cleared against a down payment, you have to adjust the tax amount accordingly.
Prerequisites
You have posted the invoice and the TDS document has been created.
Procedure
1. Clear the down payment against the invoice using the standard clearing transaction.
2. The next time you run the TDS posting program in update mode, the system makes a posting to correct the TDS, by debiting the G/L account associated with the entered tax code. It also displays the numbers of the down payment clearing document and the TDS document.
Reversing TDS Postings
Use
If you reverse an invoice or down payment that you have already calculated TDS on, you also have to reverse the TDS postings.
Procedure
When you reverse a down payment in the standard, the system automatically reverses the TDS posting. When you reverse an invoice, the system reverses the TDS posting the next time you run the TDS report in update mode.
Remittance Challans
Use
When you have remitted the deducted TDS to the government, you are sent a bank challan confirming that payment has been received. The system allows you to record the number of the challan in the invoices from which the TDS had been deducted and paid.
You can also use this function to change the challan number or date later on, if necessary.
Features
To access this report, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Enter Remittance Challans.
Selection
The system displays the transactions on which you have withheld TDS. You select the transactions for which you have remitted the TDS, enter the challan details. The system then records the challan number in each of the transactions.
If you need to change a challan number or date, enter the challan number and date that is to be changed. The actual TDS amount and the surcharge on this TDS amount are shown separately.
you update the challan number. This number will be used subsequently for the certificates.
Print Certificates
Use
You use this program to print TDS certificates for your vendors (individually or in batches). It covers the TDS in all the invoices and down payments that you have posted over a specified period.
To access the program, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Certificates → Print → Vendors.
There is a separate print program for one-time vendors, which you can access from the SAP Easy Access screen, by choosing Accounting → Financial Accounting → Accounts Payable →
Withholding Tax → India → Withholding Tax → Certificates → Print → One-Time Vendors.
Prerequisites
You have already remitted the TDS to the government and recorded the challan number in the transactions concerned (see Update of Challans). Only transactions with a challan number can be included in certificates.
The certificate printing program uses SAPscript form J_1ITDSCERT. If there are some changes in the certificate format this layout set can be changed accordingly.
If the certificates are to be divided by business area, with a unique number range per business area, you must have maintained the sections as a combination of section and business area, so for business area 0001 and section 194C, you could maintain the section as 194C0001, for example.
Features
Selection
Enter data as required, including:
The dates of the transactions that are to be covered in the certificate Withholding tax section
If you enter the business area in combination with the section, it must also be used in all other transactions involving this certificate, including annual returns.
Output
If you select the preview option, the system displays a certificate without any certificate number. The number will be assigned only when the certificate is actually printed directly (not from the print preview).
Reprint Certificates
Use
You use this program to reprint TDS certificates.
To access the program, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Certificates → Reprint.
Features
Selection
On the selection screen, enter the numbers of the certificates that you want to reprint and the details of the signatory.
Output
The system prints the certificates. Each certificate is marked as a duplicate.
Cancel Certificates
Use
You use this program to cancel TDS certificates.
To access the program, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Certificates → Cancel.
Features
Selection
Enter data as required, including the number of the certificate that you want to cancel.
Output
The system marks the certificate as canceled. It does not delete it from the database.
Archiving of TDS Documents
Use
You use these functions to archive documents for tax deducted at source (TDS). For more information about archiving, see Introduction to Data Archiving.
Before you can archive this data, you must have archived the related data form Financial Accounting (FI) and Material Management (MM).
Features
The TDS documents are archived using archiving object J_1ITDS, which is supplied with Country Version India (CIN). It is used for archiving the data in tables J_1ITDS and J_1ICERTIF.
Once you have archived the TDS documents, you must delete the originals from the database. Once you have deleted the originals, you can reload them from the archive file. Finally, you can also analyze them.
Archiving TDS Documents
1. From the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Utilities → Archive Documents.
In the Object Name field, the system displays the name of the archiving object, J_1ITDS. 2. Choose Archive.
3. Enter data as follows:
Variant
Enter the report variant that you want to use. You can create a variant if you need to.
User Name
Enter the name of user who will archive the data. 4. To specify when to start the report, choose Start Date. 5. To enter the print parameters, choose Spool Params. 6. Choose .
Creating an Archive Report Variant
1. Choose Maintain.
2. Enter a variant name of your choice. 3. Choose Create.
4. Specify which certificates you want to archive and enter other data as required:
Create
Specifies that the program will run in update mode.
Delete in test mode
Select this for test runs.
Enter the optimum package size.
Comments
Enter any comments for your own reference. 5. Choose Attributes.
6. Enter data as required. 7. Save the variant.
8. Go back to the Archive Management: Create Archive Files screen.
Deleting TDS Documents
1. From the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Utilities → Archive Documents.
In the Object Name field, the system displays the name of the archiving object, J_1ITDS. 2. Choose Delete.
3. In the User Name field, enter the name of user who will delete the documents. 4. Select Test Run if you do not want to run the report in update mode.
This will report any inconsistencies between the table data and the archive file that can be fixed. 5. To specify what archive file you want to delete the documents for, choose Archive selection. 6. To specify when to start the report, choose Start Date.
7. To enter the print parameters, choose Spool Params. 8. Choose .
Reloading TDS Documents
1. From the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Utilities → Archive Documents.
In the Object Name field, the system displays the name of the archiving object, J_1ITDS. 2. Choose Reload.
3. Enter data as follows:
Variant
Enter the report variant that you want to use. You can create a variant if you need to.
User Name
Enter the name of user who will reload the data.
4. To specify what archive file you want to reload the documents from, choose Archive Selection. 5. To specify when to start the report, choose Start Date.
7. Choose .
Archive Overview
Use
You use this report to find out where you have archived a tax deducted at source (TDS) document.
Features
Selection
On the selection screen, you specify which TDS documents you want to view. You can make your selection by vendor, business area, and TDS certificate number.
Activities
To access the report, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Withholding Tax → Utilities → View Archived Documents.
Transaction Codes for Classic Withholding Tax
Extended Withholding Tax
Use
Country Version India contains a number of features that complement the generic Extended Withholding Tax solution. For information about the generic functions, see Extended Withholding Tax. The country-specific features are described in the following documentation.
Features
Using the Extended Withholding Tax solution, you can withhold and report tax under all sections of the Income Tax Act listed in Withholding Tax.
Since a company may consist of more than one entity responsible for withholding taxes, each of which is identified by a separate TAN, you use a separate SAP organizational unit to represent each entity, the section code.
Transaction Code Action
J1INC
Post withholding tax on invoices
J1I8
Enter remittance challans
J1ICCERT
Print withholding tax certificates for vendors
J1ICOTV
Print withholding tax certificates for onetime vendors
J1ICREP
Reprint withholding tax certificates
J1ICREP
Cancel withholding tax certificates
J1INEFILE
Prepare TDS returns
J1IHBK
Copy bank IDs from invoice to TDS document
J2ID
Archive TDS documents
Activities
Customizing
For generic information about customizing Extended Withholding Tax, see Settings for Extended Withholding Tax: Overview.
Country Version India comes with sample Customizing settings for all of the aforementioned sections of the Income Tax Act. The settings include:
• Withholding tax types
• Withholding tax codes
• Official withholding tax keys, which represent the different sections of the Income Tax Act
• Recipient types, which represent the categorization of taxpayers into "companies" and "others," again, as
per the Income Tax Act
You must also customize your own section codes.
Master Data
Enter the required information in the vendor masters and in the customer masters.
Day-to-Day Activities
You are required to calculate taxes either when you enter an invoice or when you make any sort of payment, whichever comes first. Since a full payment is seldom made before the invoice arrives, that means in effect that you withhold taxes when you enter an invoice or a down payment.
When you enter a vendor invoice or make a down payment that is liable to withholding tax, the system
automatically creates line items for the appropriate taxes, including surcharges. Since different taxes need to be remitted on different dates, depending on the section of the Income Tax Act, the system also calculates and records each line item's due date.
If you first make a down payment (and withhold tax on it) and then enter the vendor invoice later on, you have to clear the invoice against the down payment so that you do not withhold tax on the same item twice.
As far as your receivables are concerned, you also enter withholding tax certificates sent to you by your customers, as proof of tax that they have withheld on payments to you.
Periodic Processing
At the end of each period, you make provisions for taxes on services received.
The authorities in India require you to remit taxes following a specific procedure. First, you create a remittance challan with a list of the withholding tax items that you are remitting. You then send the challan to the authorities, along with the check. Once the check has been cashed, the bank sends you a bank challan to confirm the payment. You then enter the bank challan in the system.
The system automatically tracks each withholding tax item's remittance challan and bank challan.
When you have remitted the tax, you can print out withholding tax certificates for all taxes that you have withheld, using functions specific to Country Version India.
Before you create your annual returns, you can also check for any customers that have not yet sent you a withholding tax certificate for tax that they have withheld from you.
Again, with receivables, if you make interest payments to your customers, you must also withhold tax on them as appropriate.
Reporting
Country Version India offers a report that you can use to prepare annual returns, and a Withholding Tax Information System for tracking and reporting purposes.
See also:
Accounts Payable (FI-AP) Accounts Receivable (FI-AR)
Definition
A system object that represents the organizational unit responsible for collecting and remitting withholding tax, as identified by a TAN.
Each company can have more than one TAN, so in the SAP system, a company code can also have multiple section codes.
Use
Customizing
Define section codes in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → India → Define Section Codes.
Day-to-Day Activities
When you post a document with a withholding tax item (for example, a vendor invoice or a credit memo), enter the section code in order to make sure that the tax item is assigned to the correct TAN. For more information, see
Entering Vendor Invoices.
In order to ensure that you always enter a section code, we recommend that you create a validation for this field.
Periodic Processing
When you print withholding tax certificates, each of your section codes can define its own forms, depending on which format is required by the income tax office. The certificate supplied with the standard system also shows the address data from the section code.
Reporting
Each TAN holder files its own tax returns. When you prepare a TDS return, you enter the TAN holder’s section code on the selection screen. The annual returns then show only the withholding tax items that are assigned to that section code.
Withholding Tax Type
Definition
See withholding tax type. For generic information about withholding tax types, see Defining Withholding Tax Types.
Use
Customizing
You define withholding tax types in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Calculation → Withholding Tax Type → Define Withholding Tax Type for Invoice Posting and … → Define Withholding Tax Type for Payment Posting. Country Version India comes with one set of sample withholding tax types for calculating tax at invoice posting and another one for calculating tax at payment posting. Both sets contain two separate tax types for each of the supported sections of the Income Tax Act (see Extended Withholding Tax), one for basic-rate tax and one for the surcharge.
All of the withholding tax types are customized so that certificate numbers are not assigned at this level. They are assigned by the programs that you use for printing the withholding tax certificates instead.
Master Data
Assign the appropriate withholding tax types to your vendor masters and customer masters.
Day-to-Day Activities
When you enter a document that is liable to tax (for example, when you enter a vendor invoice), the system automatically applies the tax type and tax code appropriate to that vendor or customer.
See also:
Accounts Payable (FI-AP)
Accounts Receivable (FI-AR)
Withholding Tax Code
Definition
For generic information about withholding tax codes, see Defining Withholding Tax Codes.
Use
Customizing
Define the withholding tax codes in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Calculation → Withholding Tax Codes → Define Withholding Tax Codes.
Country Version India comes with a sample tax code for each of the sample withholding tax types provided. The basic-rate withholding tax codes are set to 2%; the surcharge tax codes are set to 0.4%.
For reporting purposes, assign each withholding tax code to a withholding tax key.
Observe the special procedures when you customize withholding tax codes for Section 194 A of the Income Tax Act (see Exemptions and Reduced Rates for Section 194 A).
You must use withholding tax codes with posting indicator 1, otherwise you cannot clear down payments against invoices or remit withholding taxes.
Master Data
Assign the appropriate withholding tax codes to your vendor masters and customer masters.
Day-to-Day Activities
When you enter a document that is liable to tax (for example, when you enter a vendor invoice), the system automatically applies the tax type and tax code appropriate to that vendor or customer.
See also:
Accounts Payable (FI-AP) Accounts Receivable (FI-AR)
Withholding Tax Key
Definition
A system object that you use to classify withholding tax items according to which section of the Income Tax Act they belong to. This information is required in TDS returns.
Use
Check the withholding tax keys provided in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → Define Withholding Tax Keys.
Assign an official withholding tax key to each withholding tax code.
Day-to-Day Activities
Whenever you post a withholding tax item, assign it a withholding tax code as normal. Since each withholding tax code is also assigned to an withholding tax key, the system automatically knows which section of the Income Tax Act you have withheld the tax under.
Reporting
When you prepare a TDS return, it shows which section of the Income Tax Act you withheld each item under.
Recipient Type
Definition
A system object that you use to classify payment recipients as legal persons or natural persons, for the purposes of withholding tax reporting.
Use
Customizing
Define the recipient types in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → Check Recipient Types.
For each withholding tax type, create two entries as follows:
Country Version India comes with sample settings for the sample withholding tax types provided.
Master Data
Enter the recipient type in each vendor master and each customer master.
Reporting
The TDS returns separate the information about taxes withheld on legal persons and on natural persons.
Exemptions and Reduced Rates for Section 194 A
Use
Under Section 194 A of the Income Tax Act, you withhold tax on interest payments that you make, with the exception of interest on securities. You declare such taxes withheld using form 26A.
However, some payments are exempt from withholding tax, and on others, you only have to withhold tax at a reduced rate – for example, if the recipient of the payment is a bank or is a company in possession of an exemption certificate.
When you prepare your annual return, you have to declare how much interest you have paid to companies without withholding tax or with reduced-rate tax.
Activities
Customizing
Define separate withholding tax codes for calculating withholding taxes at the reduced rates and for exemptions. Make the additional settings for the withholding tax codes in Customizing for Financial Accounting (FI), by
choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Calculation → Exemptions and Reductions.
Recipient Type
Text
CO
Companies
Master Data
Enter the appropriate withholding tax codes in your customer masters and vendor masters as normal. Do not enter any exemption reasons.
Day-to-Day Activities
Whenever you post a withholding tax item that falls under this section of the Income Tax Act, make sure that you use the appropriate tax code.
Reporting
When you create a TDS return, it shows how many rupees’ worth of business you have taxed at a reduced rate, and how much was exempt from tax.
Exemptions and Reduced Rates Under Sections 197 and
197 A
Use
Under sections 197 and 197 A of the Income Tax Act, the Income Tax Department can grant companies exemptions from having tax withheld from payments to them, or reduce the withholding tax rates. You need to record this information in the system and report it in TDS returns.
Activities
Customizing
Define separate withholding tax codes for calculating withholding taxes at the reduced rates and for exemptions. Make the additional settings for the withholding tax codes in Customizing for Financial Accounting (FI), by
choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → India → Exemptions and Reductions.
Master Data
Enter the appropriate withholding tax codes in your vendor masters as normal. Do not enter any exemption reasons.
Reporting
When you prepare a TDS return, it shows how many rupees’ worth of business you have taxed at a reduced rate, and how much was exempt from tax.
See also:
Withholding Tax Code
Vendor Master (Withholding Tax Data) TDS Returns
Surcharges
Use
As well as withholding tax on payments to vendors, in India, you may also be required to withhold a surcharge.
Features
Some tax offices require you to track surcharges separately from the basic withholding tax, that is, to create separate line items for the surcharges. Others prefer you to combine the two in a single line item. The system supports both calculation methods.
Activities
Customizing
Set up the surcharge function in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → India → Surcharges. Create withholding tax types and withholding tax codes for the surcharges. The standard system comes with samples for both.
Day-to-Day Activities
When you enter a vendor invoice, the system automatically calculates any surcharges that apply. It either creates one withholding tax item or two, depending on how you have customized the system.
The following examples assume that the surcharge is 2% of the basic-rate withholding tax:
Vendor Invoice with Surcharges Shown Separately
Vendor Invoice with Surcharges Combined with Other Withholding Tax Items
Reporting
No matter which of the calculation methods you use, TDS returns show the surcharges separately.
Tax Due Dates
Use
When you enter a vendor invoice, the SAP system automatically determines what date you have to remit the withholding tax to the tax office and records it in the tax line item.
Features
There are several factors that influence the tax due date, all of which you can customize:
•
Which section of the Income Tax Act the tax is from (represented in the SAP system by the official
withholding tax key)
•
Whether the vendor is classified as a company or not (in the system, the recipient type)
•
In the event of the tax being due on a public holiday, whether the tax office requires you to remit the
tax a day earlier or a day later
Activities
Customizing
Set up the due dates in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → India → Maintain Tax Due Dates. In Customizing for FI, under Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Basic Settings → India → Assign Factory Calendars to Section Codes, specify whether, in the event of the due date falling on a public holiday, you must remit the tax on the day before or the day after.
When you enter a vendor invoice, the system automatically determines the tax due date and enters it in the tax line item.
Periodic Processing
When you come to create a remittance challan to remit the withholding tax, the system uses the tax due date.
Withholding Tax on Interest Payments to Customers
Use
Under Section 194 A of the Income Tax Act you are required to withhold tax on interest payments that you make to customers.
To calculate the interest, use the Balance Interest Calculation program, which calculates the interest and the amount of tax to be withheld.
Activities
Customizing
You have made the settings for interest calculation in Customizing for Financial Accounting (FI), by choosing Accounts Receivable and Accounts Payable → Business Transactions → Interest Calculation.
Periodic Processing
Execute the program as described in the documentation.
There are two types of output. The system either creates a batch input session, which you can process, or it displays the details of the interest to be posted, which you can post manually. In both cases, you must ensure that each customer line item contains a section code.
The program creates an accounting document as follows:
It copies the section code from the customer line item to the withholding tax item, and calculates the tax due date (see Tax Due Dates).
Journal Vouchers
Use
If, after you have entered and cleared a vendor invoice and you have discovered that you have posted the wrong amount of tax or that you have posted the tax using the wrong official tax key, you have to enter a journal voucher
(JV) to correct the error.
To access the function, from the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Extended Withholding Tax → Journal Vouchers → Enter.
Prerequisites
You have maintained the settings in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Postings → India → Journal Vouchers.
Features
You only need to create JVs to adjust withholding tax items and vendor items that you have already cleared. Otherwise, you can reverse the original document using the generic functions.
You do not need to adjust a tax item if you have already issued a withholding tax certificate for it and the vendor has accepted it, since, in this case, the vendor can use this certificate to claim a refund from the tax authorities. When you enter a journal voucher, the system creates an accounting document as follows:
If you have already remitted the tax to the tax office and you change the tax code so that it uses a different official withholding tax key, the system makes a second posting to correct the tax under the right tax key. This posting debits the loss account and credits the tax expense account.
See also:
Entering Journal Vouchers
Entering Journal Vouchers
1. In the Document Number field, enter the invoice number. 2. Enter other data as required and choose Check.
3. Depending on what you want to change, choose Amount Correction or Tax Code Correction. 4. Change the tax amount to the correct amount, or change the tax code.
To check what adjustment posting will be made, select the line item that you have changed and choose Simulate.
5. Save the journal voucher.
Provisions for Taxes on Services Received
Purpose
In India, when you come to prepare your financial statements, you are required to make an adjustment entry for any accrued withholding taxes.
That means that if, when you prepare your statements, a vendor has provided you with some services but not yet sent you an invoice, you make an adjustment entry for the taxes that you will withhold on the vendor payment. When you make the entry, you must take into account any tax that you have already withheld on any down payments that you have made.
Type of change Debit Credit
Tax refund to vendor (tax already remitted) Loss account Vendor account Tax refund to vendor (tax not yet remitted) Tax payable account Vendor account
Once the vendor sends the invoice, you reverse the provision.
Prerequisites
In Customizing for Financial Accounting (FI), you have made the settings under Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Postings → India → Provisions for Taxes on Services Received.
Process Flow
1. A clerk enters a purchase order for services to be provided.
2. A vendor provides you with some services on 25 January, and the clerk enters the service receipt in the system accordingly.
The system then automatically creates the following accounting document:
3. At month-end, the vendor has not sent you an invoice. You will be required to withhold tax on the payment, so you enter a provision for the withholding tax.
The system creates an accounting document as follows:
You can now prepare your financial statements correctly.
4. On 7 February, the vendor sends you the invoice, and you enter it in the system.
When you enter the invoice, the system automatically calculates how much tax you have to withhold when you pay the vendor. It does not clear the provision against the invoice, so at this moment your accounts are actually incorrect, because they have two entries for the same amount of withholding tax.
5. In the evening, you reverse the provision.
By reversing the provision, you put your accounts in order again.
Entering Provisions
On the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts
Payable → Withholding Tax → India → Extended Withholding Tax → Provisions for Tax on
Services Received → Enter.
Enter the following information:
Organizational data, such as company code and financial year
The G/L accounts that you want to post provisions for
Other information relating to the items that you want to adjust (for example, vendors or purchase
orders)
Information relating to the posting document that the system will make the tax postings with
Choose
.
A list appears, which shows you per purchase the following:
You now have to specify how much tax has to be withheld. For each purchase order:
Enter the tax type and tax code of the tax that has to be applied
Use invoice tax types only.
Enter the section code.
Column
Information
Open amount
The total amount of all services received that have yet to be
invoiced, irrespective of whether you have already calculated tax
on them
Open provision
The amount from goods receipts that you have already calculated
tax on
LC bas.amt (Base
amount in local currency)
Enter the business area, if required.
If you have made a down payment on the purchase order, reduce the tax base amount by this amount.
5.
When you have entered all the data, save it.
Reversing Provisions
Use
Follow this procedure to reverse provisions that you have made for taxes on services rendered. You can only reverse the provisions for invoices that you have received since you posted the provision.
We recommend that you run this program every night in the background, in order to avoid discrepancies in your data.
Procedure
1. From the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Extended Withholding Tax → Provisions for Tax on Services Received → Reverse.
2. On the selection screen, enter:
Organizational data, such as the company code The posting date of the invoices
The posting period
3. Choose .
Remittance of Withholding Tax
Purpose
You are required to follow a specific procedure when remitting withholding tax to the authorities.
Prerequisites
Before you remit your withholding tax, you must have entered any provisions for taxes on services received.
Process Flow
When the time comes to remit a given sort of tax (see
Tax Due Dates
), you create a
remittance challan
.
The system creates an accounting document to transfer the withholding tax items to the appropriate bank
account.
After a few days, the bank sends you a
bank challan
to confirm that it has received your check.
You enter the bank challan in the system.
When you do so, the program records the bank challan number in every withholding tax item remitted.
This information may be required in order to substantiate your accounts.
Result
You can create withholding tax certificates for the withholding tax items that you have remitted.
Remittance Challans
Use
The system allows you to create and cancel remittance challans for payables and receivables.
Prerequisites
You have made the Customizing settings in Customizing for Financial Accounting (FI), by choosing Financial Accounting Global Settings → Withholding Tax → Extended Withholding Tax → Postings → India → Remittance Challans.
Features
Accounting Documents
When you create a remittance challan, the system identifies which withholding tax items need to be remitted (see
Tax Due Date).
It then creates an accounting document to clear these items from the withholding tax payable account to the bank account that you want to transfer the tax from.
Challan Numbers
The system generates separate remittance challans for each tax office (section code) and each section of the Income Tax Act (withholding tax key) and numbers each one accordingly. It records the challan number in the withholding tax items for future reference, although you cannot display it directly from any of the system transactions.
Constraints
The programs do not cover part payments of tax items or residual payments.
Creating Remittance Challans
To access the programs, on the SAP Easy Access screen, choose Accounting → Financial
Accounting → Accounts Payable → Withholding Tax → India → Extended Withholding Tax
→
Remittance of Withholding Tax → Create Remittance Challan or Accounting → Financial
Accounting → Accounts Receivable → Withholding Tax → India → Withholding Tax for
Payments to Customers → Remittance of Withholding Tax → Create Remittance Challans.
On the selection screen, enter the following data:
Which withholding tax items you want to remit
We recommend that in order to get the most accurate selection, you enter a payment due date.
If you need to restrict the selection to a specific vendor or customer, for example, if you want to remit
the tax for government bodies only, you can do so.
Tax remittance information, including any charges made by your bank for accepting the check
Choose
.
The system calls the standard outgoing payment program, which presents you with a selection of tax line
items for clearing.
To make it easier for you to select the open items, we recommend that you create a line layout that
includes the following fields:
•
Value Date (tax due date)
•
Section Code
•
Reference Key 3 (tax code and recipient type information)
•
Text (information on down payment clearing tax transfer)
Activate the items that you want to remit and make a note of the total in the Assigned field.
Choose
.
The system displays an overview of the line items created so far, including any bank charges that you
have entered, and an offsetting posting to deduct your bank account.
Double-click the credit entry for your bank account.
Change the amount so that it matches the total line items (from step 3) plus the bank charges.
Choose Document → Simulate.
The system goes back to the line item overview.
To update the overview, choose Document → Simulate.
Save the document.
The program displays a list with the details of the challan numbers generated and the tax remitted. Basic
withholding tax and surcharges are listed separately.
Canceling Remittance Challans
Purpose
If for any reason an error occurs when you create a remittance challan, you use this function to cancel the challan and reverse the accounting document. This function does not work, however, if you have already entered the bank challan (see Entering Bank Challans).
Procedure
1. From the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts Payable → Withholding Tax → India → Extended Withholding Tax → Remittance of Withholding Tax → Cancel Remittance Challan or Accounting → Financial Accounting → Accounts Receivable → Withholding Tax → India → Withholding Tax for Payments to Customers → Remittance of Withholding Tax → Cancel
Remittance Challan.
2. Specify which accounting document you want to reverse. This is the accounting document that the system created when you created the remittance challan.
3. Choose .
The system prompts you to specify what sort of reversal you want to make. 4. Choose Resetting and Reverse.
5. Enter a reversal reason and choose .
The system displays two dialog boxes, one with the number of the document posted. After you have closed the dialog box, you go back one screen to display a list of the documents that you have reversed.
Result
The system:
Cancels the remittance challan
Creates an accounting document to reverse the postings made when you create the remittance challan
Entering Bank Challans
Purpose
When the bank sends you a bank challan, you enter the bank challan in the system. The system stores the bank challan number in all remitted withholding tax items by way of proof that you have remitted the tax.
Procedure
On the SAP Easy Access screen, choose Accounting → Financial Accounting → Accounts
Payable → Withholding Tax → India → Extended Withholding Tax → Remittance of
Withholding Tax → Enter Bank Challan or Accounting → Financial Accounting → Accounts
Receivable → Withholding Tax → India → Withholding Tax for Payments to Customers →
Remittance of Withholding Tax → Enter Bank Challan.
Enter data as required, including:
Organizational data, such as your company code
Remittance challan number
Bank challan details
Choose
.
Result
The system:
• Records the bank challan details in the remitted withholding tax items
This information will be included in the vendor withholding tax certificates when you print them.
• Displays a list of the updated items
Withholding Tax Certificates for Vendors and Customers
Use
You must present your vendor or customer with a withholding tax certificate within 60 days of the business transaction.
You do not use the generic programs for printing withholding tax certificates. Instead, Country Version India offers two programs that you can use to print withholding tax certificates, one for vendors and one for customers.
Prerequisites
You can only print the certificates once you have remitted the tax in question and entered the bank challans. Any other tax items will not be included in the certificates.
Features
Certificates
The programs print a separate certificate for each vendor or customer. Each certificate shows all the withholding tax items belonging to that vendor of customer. The items are listed according to their bank challan number, as required by law.
The program numbers the certificates, but only when you print the certificates directly, not in the print preview. If you have had dealings with the same vendor or customer in more than one tax jurisdiction (tax office), the system prints a separate certificate for each tax office. The system allows you to print out the certificates on different SAPscript forms for every tax office and every section of the Income Tax Act, if required.
Credit Memos, Down Payments
The system deducts credit memos and down payments from the invoices that they belong to, if such information is available.
One-Time Accounts
For one-time vendors or one-time customers, only one business transaction is printed. The address details are taken from the appropriate document for the vendor or customer.
Separate programs are available for reprinting and canceling vendor certificates.
