SAP Financials - Tax Collected At Source Manual

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This document relates to SAP Financials - Tax Collected At Source Manual. Copy Rights Reserved© SourceOne Management Services Pvt. Ltd Bangalore.

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SAP Financials - Tax Collected At Source Manual

  1. 1. SAP Financials Tax Collected at Source - TCS Prepared By: Ms. Pramila Nagaraj First Class MBA Finance Graduate (2010) - FRESHER Global Academy of Technology, Bangalore (VTU- Belgaum) SAP Financials Associate Certified Consultant – Trainee/Fresher Certified Candidate @ Source One Management Services Pvt. Ltd Bangalore 2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore
  2. 2. 2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore Tax Collected at Source This is a form of tax in India, which is collected at source from the buyer by the seller of prescribed items. It is commonly referred to as TCS. The system automatically calculates the tax collected at source and makes the relevant postings in Financial Accounting (FI) and Sales and Distribution (SD). Prerequisites You have: Made settings as described in Customizing for Tax Collected at Source Entered the TCS withholding tax type and withholding tax code and selected the W/tax checkbox in the customer master. For more information, see Customer Master (Withholding Tax Data). Features Tax Collected at Source has the following features: The rate of tax collected at source differs based on the type of commodity. The Education Cess and the Secondary and Higher Education Cess are applicable at a certain percentage on the tax collected at source. The seller of the items should furnish a tax certificate specifying whether tax has been collected, the amount that has been collected, rate of tax applied, and such other particulars as may be prescribed. Activities You post the tax collected at source by creating: 1. A sales order using the Create Sales Order (VA01) transaction. 2. An outbound delivery using the Create Inbound Delivery (VL01) or the Create Inbound Delivery with Order Reference (VL01N) transactions. 3. A billing document using the Create Billing Document (VF01) transaction. Example Consider an invoice for goods of INR 1000 and TCS of 10%. The goods buyer pays the tax collected at source. During the creation of billing document, the system makes the following postings: Account Debit (Dr) Credit (Cr) Customer A/c Dr 1100 Sales A/c Cr 1000 TCS payable Cr 100
  3. 3. 2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore Customizing for Tax Collected at Source To calculate and report tax collected at source, make the following settings (all under country key IN) : Customizing Settings 1. Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Basic Settings Define Withholding Tax Keys Create official withholding tax key 206C 2. Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Calculation Withholding Tax Type Define Withholding Tax Type for Invoice Posting Create withholding tax type S1 with the name Tax Collected at Source-Base and make the following settings: - Base amount = Modif. net amount - Rounding rule = Round w/tax amnt up - Select Post w/tax amount checkbox - Accumulation type = No accumulation - Control data = select checkboxes W/tax base manual, Manual w/tax amnt, and No cert. numbering Similarly create withholding tax types S2, S3, and S4 with the names Tax Collected at Source-Surcharge, Tax Collected at Source- Education Cess, and Tax Collected at Source-SECESS respectively and make settings as stated above. 3. Sales and Distribution Basic Functions Pricing Pricing Control Define Access Sequences (chooseMaintain Access Sequences) Copy the existing access sequence J1AW and create a new access sequence J1IW with the name Withholding tax code - country-specific and make the following settings: - Access sequence-Access number = 10 - Condition table = 399 4. Sales and Distribution Basic Functions Pricing Pricing Control Define Condition Types (choose Maintain Condition Types) Create condition type JTCS with the name TCS-Base and make the following settings: - Access sequence = J1IW - Cond. class = W - Calculat. type = A - Cond. category = D - Select Item Condition checkbox Similarly create condition types JTEC and JTSE with the namesECS on TCS and SECess on TCS respectively and make settings as stated above. 5. Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Calculation Withholding Tax Type Assign condition types JTCS, JTEC, and JTSE to withholding tax types S1, S3, and S4 respectively.
  4. 4. 2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore Assign Condition Type to Withholding Tax Type 6. Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Calculation Withholding Tax Code Define Withholding Tax Codes Create withholding tax code S1 with name TCS-Base and make the following settings: - Off. W/Tax Key = 206C - Post.indic. = 3 Similarly create withholding tax codes S3 and S4 with the names Education cess on TCS and SE Cess on TCS and make settings as stated above. 7. Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Posting Accounts for Withholding Tax Define Accounts for Withholding Tax to be Paid Over Enter the chart of accounts CAIN. You need to maintain the same G/L account for the transaction key WIT-based tax line items and SD-FI condition based tax line items. Maintain a separate G/L account for the transaction key OFF- based line items. Since posting of TCS happens on both SD and FI documents, ensure that you assign the same G/L account for each combination of withholding tax type and withholding tax code. Note To post tax collected at source for Sales and Distribution documents, maintain the same G/L account in Customizing for Sales and Distribution, by choosing Basic Functions Account Assignment/Costing Revenue Account Determination Assign G/L Accounts . 8. Sales and Distribution Basic Functions Free Goods Control Free goods Pricing Maintain Pricing Procedure For Pricing Select the pricing procedure JINFAC and double-click Control data. The system displays the Control data screen. Define the condition types JTCS, JTEC, and JTSE and add them to the pricing procedure JINFAC. The system calculates the values of the goods but does not post them directly to the Sales and Distribution document (SD). Instead, posting takes place based on the assignment of condition types to the withholding tax types (refer step 5). 9. Sales and Distribution Basic Functions Pricing Pricing Control Define Condition Types (choose Maintain Condition Types) Create a new condition type JWTS to post TCS to Financial Accounting (FI) documents. Add this condition type to the pricing procedure JINFAC. Similarly create condition types JETS for ECS on TCS and JSTS for SECess on TCS and add them to the pricing procedure JINFAC.
  5. 5. 2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore http://help.sap.com/erp2005_ehp_04/helpdata/en/7c/1ca286b15d4eb7a3211665617d9bde/content.ht m?frameset=/en/ef/1b7d59f528432680c600ad083fbf18/frameset.htm TCS Configuration under Sec. 206C Tax Collected at Source (Under Sec. 206C) Configuration This is a legal requirement and it is required for companies dealing with scrap sales, Alcohol sales and timber sales. TCS is applicable to the buyer, deducted by seller, during sale of the following items: o Alcoholic liquor for human consumption(other than Indian made foreign liquor) o Tendu leaves o Timber o Any other forest produce not being Timber/Tendu leaves o Scrap This is a tax which is to be deducted for prescribed items, by the Seller at the time of debiting the amount payable by the buyer. This tax deduction is to be done at transaction item level based on the Prescribed rates defined by the Income tax office. In addition, the seller is to submit a certificate to the buyer regarding the tax deducted and paid on their behalf, pay the prescribed amount to the government and file half yearly returns on the same. Required Configuration: 1. Define Withholding Tax key (206C) 2. Define Withholding Tax type 3. Create the access sequence for withholding for TCS in SD (Copy the existing access sequence J1AW and create the new access sequence) 4. Create condition types corresponding to Tax collected at Source in SD 5. Assign withholding tax types to SD condition types 6. Define withholding tax codes 7. Assign GL accounts for withholding tax types 8. Add TCS conditions in pricing procedure (assign TCS conditions in pricing procedure as a statistical conditions) 9. We will need to define a new condition type and add this to the pricing procedure to post to the FI. This condition type will be manual and can be manually filled at the time of creation of sales order. This can also be copied from the statistical TCS condition types in the pricing procedure

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