TDS calculation and transactions as per Section 194Q
[!INCLUDE[vnext_preview](../../includes/vnext_preview.md)]As per new TDS rules, TDS to be deducted to any person, being a buyer responsible for making a payment to a resident for purchase of goods when value or aggregate of purchase from a supplier or payment whichever is earlier, Rs.50 lacs during the previous year.
As per this section, any purchase invoices/payments that is over and above the threshold amount (50,00,000). TDS amount to be deducted on amount exceeding threshold limit. For Example, Buyer buys goods from Seller amounting to INR. 85 lakhs and is liable to deduct TDS under section 194 Q. In this case TDS to be deducted on INR. 35 lakhs (85-50) @ 0.1%.
Provision (Calc. Over & Above Threshold) has been provided for user on TDS Rates to calculate TDS on amount that is over & above threshold.
The existing TDS calculation logic in system will work for invoice and advance payment normally, below are the functions for example:
- TDS Calc. Over & Above Threshold
- Normal TDS Calculation
- TDS Calculation on Advance Payment
TDS to be calculated on vendor invoice (through purchase invoice or purchase order).
In the given scenario, vendor has issued an invoice for INR 55,00,000, on which 0.10% TDS is applicable under TDS Section 194Q. Initial threshold achieved value or opening balance under section 194Q, is INR 20,00,000.
In this case TDS calculation will be as following:
Component Value Initial threshold achieved value/ Opening Balance 20,00,000 1st Transaction, on or after 1st July 21 2000000 – No TDS 2nd Transaction, on or after 1st July 21 1500000 – TDS Calculated TDS Base Amount 500000 (Total cumulative value 5500000 -5000000) TDS Amount 500 (500000*0.10%) On posting purchase invoice of second transaction, GL entries will be as following:
Particulars Amount Expense Account 1500000 Vendor Account -1499500 TDS Payable Account -500
TDS to be calculated on vendor advance payment (through general or payment journal).
In the given scenario, two advance payments must made to vendor for INR 20,00,000 and 15,00,000 respectively, on which 0.10% TDS is applicable under TDS Section 194Q. Initial threshold achieved value or opening balance under section 194Q is INR 20,00,000.
In this case TDS calculation will be as following:
Component Value Initial threshold achieved value/ Opening Balance 2000000 1st Transaction, on or after 1st July 21 2000000 – No TDS 2nd Transaction, on or after 1st July 21 1500000 – TDS Calculated TDS Base Amount 500000 (Total cumulative value 5500000 -5000000) TDS Amount 500 (500000*0.10%) On posting purchase invoice of second transaction, GL entries will be as following:
Particulars Amount Vendor Account 1500000 Bank Account -1499500 TDS Payable Account -500