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1. Withholding Tax
 Withholding tax is a tax deducted at the beginning of payment flow. Amount withheld paid and
reported to the tax authority on behalf of the person who is subject to tax. Two type of withholding tax
1. Classical Withholding tax
2. Extended withholding tax
 A withholding tax, also called a retention tax, is a government requirement for the payer of an item of
income to withhold or deduct tax from the payment, and pay that tax to the government.
 In most jurisdictions, withholding tax applies to employment income. Many jurisdictions also require
withholding tax on payments of interest or dividends. In most jurisdictions, there are additional
withholding tax obligations if the recipient of the income is resident in a different jurisdiction, and in
those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate.
 Governments use withholding tax as a means to combat tax evasion, and sometimes impose additional
withholding tax requirements if the recipient has been delinquent in filing tax returns, or in industries
where tax evasion is perceived to be common.
 The amount of withholding tax on income payments other than employment income is usually a fixed
percentage. In the case of employment income the amount of withholding tax is often based on an
estimate of the employee's final tax liability, determined either by the employee or by the government.

2. Basic Configurations to Withholding Tax
Check Withholding Tax countries :
Path : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding Tax-
Extended withholding tax-Basic settings-Check Withholding Tax countries.
In this activity we check the withholding tax countries.
The withholding tax country is needed for printing the withholding tax form. Since the list of country IDs
prescribed by law is different from the list in the system, we have to define the withholding tax countries
again.
Activities
1. Check the country list delivered with the standard system.
2. Compare it with the official list from the tax authorities and make corrections where necessary.
Example
India, Japan, USA (1042), Argentina etc..

3. Define withholding Tax type for invoice postings
PATH: SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding Tax-
Extended withholding tax-Calculation-Withholding Tax type for invoice posting
In this activity we define the withholding tax type for the posting at the time of entering an
invoice. This withholding tax type does not have any effect on the payment.
Further notes:
• All calculations for extended withholding tax are made in the first local currency of the respective
company code.
• This means that you have to maintain amounts in the company code country currency.

4. Define withholding Tax type for Payment Postings
PATH: SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding Tax-
Extended withholding tax-Calculation-Withholding Tax type for Payment posting
In this activity we define the withholding tax type for posting at the time of paying. We also have to enter
the withholding tax information when entering the document for this withholding tax type.
Further notes:
• All calculations for extended withholding tax are made in the first local currency of the respective company
code.
• This means that you have to maintain amounts in the company code country currency.

5. Define Withholding Tax keys
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax-Extended withholding tax-Basic settings-Define withholding Tax keys.
• If our national tax authorities use withholding tax keys to identify the different withholding tax
types, we can define these official names for our tax codes here.
• To assign the official withholding tax key to the relevant withholding tax code, choose the IMG
activity Define Withholding Tax Codes.
Some of the common Withholding tax keys are:
149B:Winnings from races>5000
193:Interest on debentures & securities
194:Deemed dividends
194C:Contract incomes
194H:Commission on brokerage
194J:Professional or Technical fees
194L:Compensation on immovable property

6. Check recipient Types
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding Tax-
Extended withholding tax-Basic settings-Check recipient Types.
• In this activity, we check the type of recipient for 1042 reporting in the Company or Others.
• The type of recipient categorizes the vendor, which is necessary for printing the withholding tax form.
Activities
• Check the standard list of types of recipient and make corrections if necessary

7. Check Income Types
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax-Extended withholding tax-Basic settings-Check Income types
In this activity you check the revenue types for the withholding tax report in a country.
• We use the revenue type to classify our (foreign) vendors by revenue.
• We u need the revenue types as a specification for the withholding tax report.
Activities
• 1. Check the list of revenue types in the standard system and make any necessary adjustments.
• 2. Store the revenue type in the withholding tax code under "Specifications for the withholding tax
report".

8. Define business Places
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax-Extended withholding tax-Basic settings-India-Define business place
In this IMG activity, we define your business places. The use of business places is mandatory.
Activities
• Create a business place for each tax deduction account number (TAN) that our company has.
• In the address data (which is printed on the vendor withholding tax certificates maintain the tax
office's address as follows:
• Name (lines 1 and 2)
• Enter the name of the tax office.
• Name (lines 3 and 4)
• In these fields, enter the TDS range and circle respectively for annual returns.
• Search term 1
• Enter your TAN at this office.
• Street 2, Street 3, and Street/House number
• Enter the business place's postal address.
• District
• Postal code/City
• Enter our PIN code and city.

9. Define Section Codes
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax - Extended withholding tax- Basic settings-South Korea-Define Section code
In this IMG activity, we define the section codes that are covered by our enterprise. We create one
section code for every permutation of local tax office and the district tax office that you report to.
Activities
For each section code, enter a name, the district tax office, and the local tax office. If a section code
represents a single business place, enter the business place as well.
Example
• A company has a site in Seoul, where its headquarters and a factory are located, and another factory
in Pusan:
• The Seoul site reports to district tax office 300, but the headquarters and the factory report to
different local tax offices (150 and 160).
• The Pusan factory reports to another district tax office, 851, and local tax office 700.

10. Assign Factory Calendar to Business place
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax-Extended withholding tax-Basic settings-India-Assign Factory Calendar to business place.
• In this IMG activity, we effectively specify which days the tax offices that we work with are open.
• The system uses this information when we post a vendor invoice, so that it can allow for public
holidays when it determines the tax due date.
• This activity is optional. If we do not make any entries, the system still determines the tax due date,
but without reference to any factory calendar.
Requirements
• We have maintained factory calendars for each of the calendars followed by the tax offices.

11. Maintain Tax Due Dates
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-
Withholding Tax-Extended withholding tax-Basic settings-India-Maintain Tax Due Dates
Use
• In this IMG activity, we maintain the various tax due dates.
• Because due dates can differ, depending on the withholding tax type and recipient type, we can
maintain the dates at this level.
• Make sure that you maintain entries for all the recipient types that we use.
Activities
• For each permutation of official withholding tax key and recipient type, specify when the tax has
to be remitted.

12. Define Withholding Tax codes
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-
Withholding Tax-Extended withholding tax-Calculation-Withholding Tax code-Define
withholding Tax code
In this activity you define the withholding tax codes.
Activities
• Define the required withholding tax codes.
Further notes
• All calculations for extended withholding tax are made in the first local currency in the respective
company code.
• This means that we have to maintain amounts in the company code country currency.

13. Create Accounts
We have to create four GL accounts for Withhold Tax postings. They are:
• TDS account
• Surcharge account
• Education cess account
• Higher education cess account
Tcode: FS00

14. Define accounts for withholding tax to be paid over
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-Withholding
Tax-Extended withholding tax –Posting-Account for withholding tax-Define accounts for
withholding tax to be paid over
In this activity we have to define the accounts for the withholding tax to be paid over

15. Portray Dependencies between withholding tax types
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-
Withholding Tax-Extended withholding tax –Calculation-Withhold tax base amount-Portray
Dependencies between withholding tax types
• In this activity we can represent dependencies between withholding tax categories.
Activities
• Maintain the dependencies

16. Define Minimum & Maximum Amount for Withhold tax type codes
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)-
Withholding Tax-Extended withholding tax –Calculation-Minimum and Maximum amount-
Define Min & Max amount for withhold tax type codes.
In this activity we define minimum and maximum amounts for withholding tax codes.
• In the withholding tax base exemption amount field we can specify an amount which is deducted
when calculating the withholding tax base. The amount of the tax exemption does not have any
effect when matching the withholding tax base with the minimum, because the base and the
minimum are matched before the tax-exempt amount is deducted.
Activities
• Define the amounts.
Further notes
• All calculations for extended withholding tax are made in the first local currency of the respective
company code. This means that we have to maintain amounts in the company code country
currency.

17. Assign withholding tax types to company code
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global
Settings(new)Withholding Tax-Extended withholding tax –Company code-Assign withholding
tax types to company code
In this activity we assign withholding tax categories to company codes.

18. Activate Extended Withholding Tax
PATH : SPRO-Financial Accounting(new)-Financial Accounting Global Settings(new)Withholding
Tax-Extended withholding tax –Company code-Activate Extended withholding Tax
In this activity we activate extended withholding tax.
Extended withholding tax provides the following additional features:
• Multiple withholding taxes per customer or vendor line item
• Withholding tax calculation for partial payments
Activities
1. Migrate our master data and transaction data.
2. Activate extended withholding tax.
3. Carry out Customizing in Financial Accounting Global Settings under Withholding Tax ->
Extended Withholding Tax.

19. THANK YOU
G.DORASANAIAH