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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
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

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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 Create official withholding tax key 206C
Accounting Global Settings (New)
Withholding Tax Extended Withholding
Tax Basic Settings Define Withholding Tax
Keys

2. Financial Accounting (New) Financial Create withholding tax type S1 with the name Tax Collected at
Accounting Global Settings (New) Source-Base and make the following settings:
Withholding Tax Extended Withholding - Base amount = Modif. net amount
Tax Calculation Withholding Tax Type - Rounding rule = Round w/tax amnt up
Define Withholding Tax Type for Invoice - Select Post w/tax amount checkbox
Posting - 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 Copy the existing access sequence J1AW and create a new
Functions Pricing Pricing Control access sequence J1IW with the name Withholding tax code -
Define Access Sequences (chooseMaintain country-specific and make the following settings:
Access Sequences) - Access sequence-Access number = 10
- Condition table = 399

4. Sales and Distribution Basic Create condition type JTCS with the name TCS-Base and make the
Functions Pricing Pricing Control following settings:
Define Condition Types (choose Maintain - Access sequence = J1IW
Condition Types) - 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 Assign condition types JTCS, JTEC, and JTSE to withholding tax
Accounting Global Settings (New) types S1, S3, and S4 respectively.
Withholding Tax Extended Withholding
Tax Calculation Withholding Tax Type

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Assign Condition Type to Withholding Tax
Type

6. Financial Accounting (New) Financial Create withholding tax code S1 with name TCS-Base and make
Accounting Global Settings (New) the following settings:
Withholding Tax Extended Withholding - Off. W/Tax Key = 206C
Tax Calculation Withholding Tax Code - Post.indic. = 3
Define Withholding Tax Codes 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 Enter the chart of accounts CAIN. You need to maintain the same
Accounting Global Settings (New) G/L account for the transaction key WIT-based tax line items and
Withholding Tax Extended Withholding SD-FI condition based tax line items.
Tax Posting Accounts for Withholding Maintain a separate G/L account for the transaction key OFF-
Tax Define Accounts for Withholding Tax to based line items.
be Paid Over 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 Select the pricing procedure JINFAC and double-click Control data.
Functions Free Goods Control Free goods The system displays the Control data screen.
Pricing Maintain Pricing Procedure For Define the condition types JTCS, JTEC, and JTSE and add them to
Pricing 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 Create a new condition type JWTS to post TCS to Financial
Functions Pricing Pricing Control Accounting (FI) documents. Add this condition type to the pricing
Define Condition Types (choose Maintain procedure JINFAC.
Condition Types) Similarly create condition types JETS for ECS on TCS and JSTS for
SECess on TCS and add them to the pricing procedure JINFAC.

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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

2013 Copy Rights Reserved © SourceOne Management Services Pvt. Ltd, Bangalore

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