TDS Calculation for a Scenario of Per Transaction wise and Cumulative as well in D365 F&O

 Business Scenario

• AS per Indian Income Tax Act 1961, Section 194C, If payment to the contractor exceeds Rs. 30000, then TDS would be deducted. This limit is per invoice basis. 
• However, if the aggregate of amount paid to the contractor exceeds Rs. 100000, then TDS would be deducted from the whole amount that was non-taxed in the previous transaction.

Invoice No	Invoice Amount	TDS@2%
Inv-01	35,000	700
Inv-02	22,000	N.A.
Inv-03	25,000	N.A.
Inv-04	21,000	1,360
Total	1,03,000

Here, TDS 1360 is calculated on previously non-taxed transactions i.e. (22000+25000+21000) @ 2% = 1360. TDS is calculated because the aggregate of all four invoices is exceeding the threshold limit of 100000.

Configuration

1. Click new to create a new withholding tax component group

2. Create withholding tax components

3. Create a threshold definition

Note: mandatorily Make final level yes to the last threshold range like for cumulative 100000 - max and per transaction 30000 - max 

4. create withholding tax codes

5. create withholding tax groups

6. Go to withholding tax codes and enable threshold hierarchy

Setup of threshold designer as per scenario:

7 Map TDS group to vendor master and fill in PAN number

Result

Invoice No	Invoice Amount	TDS@2%	Remarks
Inv-1	35,000	700	Created Invoice journal and posted for Vendor Vendor1, TDS calculated of INR 700
Inv-2	22,000	N.A.	Created Invoice journal and posted for Vendor Vendor1, No TDS calculated
Inv-3	25,000	N.A.	Created Invoice journal and posted for Vendor Vendor1, No TDS calculated
Inv-4	21,000	1,360	Created Invoice journal for Vendor Vendor1 and tax is correctly calculated on (22000+25000+21000) @2% i.e. 1360
Total	1,03,000

Note: previous 3 transactions should be posted only then in 4th transaction TDS calculation will happen on the non-taxed invoice

Happy Learning!

Thank You