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Configuration Design Document

FI – Extended Withholding Tax (EWT)

Table Of Contents
1.1

Define Withholding Tax countries............................................................................ 10

1.2

Define withholding tax keys..................................................................................... 10

1.3

Check Recipient Types............................................................................................. 15

1.4

Define Business Places............................................................................................ 11

1.5

Assign Factory Calendars to Business Places.......................................................... 11

1.6

Maintain Tax due dates............................................................................................ 11

1.7

Define Section Code................................................................................................. 12

1.8

Withholding tax type................................................................................................ 12

1.9

Define withholding tax type for payment posting.........................................................

1.10

Define rounding rule for withholding tax types......................................................... 17

1.11

Define Withholding tax codes................................................................................... 18

1.12

Maintain surcharge rates.......................................................................................... 19

1.13

Assign withholding tax type to company code......................................................... 20

1.14

Activate Extended Withholding tax........................................................................... 21

1.15

Define accounts for withholding tax......................................................................... 21

1.16

Specify Document type............................................................................................ 22

1.17

Maintain number groups.......................................................................................... 22

1.18

Assign number ranges to number groups................................................................ 23

1.19

Maintain number groups and SAP script forms........................................................ 24

1.20

Assign Number ranges to number groups................................................................ 25

under the Ministry of Finance. winnings from lottery. Govt. payments to non-residents etc. as applicable under the Act[1]. This is governed under Indian Income Tax Act. within the specified time. Income from several sources is subjected to tax deduction at source. by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS). has to be deposited in the Government treasury to the credit of Central Govt. interest on securities. It is always considered as an Advance tax which is paid to the government. Tax Deduction Account Number or TAN is a unique identification number for person deducting the tax. deduction of tax is effected at the source when income arises or accrues. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment. Hence where any specified type of income arises or accrues to any one. 1961. The tax so deducted at source by the payer. commission and brokerage. Presently this concept of TDS is also used as an instrument in enlarging the tax base.What is a withholding tax? Tax Deducted at Source or best known as TDS is one of the modes of collecting Income-tax from the assessees in India. fees for professional and technical services. TDS is the tax getting deducted from the person receiving the amount (Employee/Deductee) by the person paying such amount (Employer/Deductor). Some of such income subjected to TDS are salary. dividend. horse races. interest. of India. This is applicable for certain types of payments. The person who is liable to deduct the Tax should obtain a Tax Deduction Account Number . OVERVIEW In simple terms. In the process of TDS. rent. the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income.

Once approved. and permanent. even between states. It is unaffected by a change of address. national. the details are verified and then sent to Income Tax Department. TAN Application should accompany a 'proof of identity' and a 'proof of address' (photocopies) of the deductor. sale or purchase of assets above specified limits. [E.: BLRR02933A]. In case. Permanent Account Number (PAN) is unique alphanumeric combination issued to all juristic entities identifiable under the Indian Income Tax Act 1961. the application is made online. Remaining characters form a unique combination to get identified at Income Tax Department.1 Alpha. OR can also be submitted at Tax Information Network Facilitation Center (TIN-FC). receiving taxable salary or professional fees. It is issued by the Indian Income Tax Department under the auspices of the Central Board for Direct Taxes (CBDT) and is almost equivalent to a national identification number. .TAN before deducting such Tax. The PAN is unique. TAN should applied through Form No 49B (prescribed under Income Tax Law). TAN will be 10 characters' alpha numeric string comprising of 4 Alpha .5 Numeric . The first 3 characters consists of Income Tax Region Code (BLR => Bangalore) and the Fourth digit consists of 'First Character' of deductor name (R => Relyon Softech Ltd). Income Tax Department will allocate a unique number.g. these documents need to be sent over mail (post/courier) to NSDL TAN Application division. These centers are established by NSDL (which is an appointed intermediary by the Government) across India[2]. The primary purpose of PAN is to bring a universal identification key factor for all financial transactions and indirectly prevent tax evasion by keeping a track of monetary transactions of high net worth individuals. Once NSDL receives the TAN application along with said documents (either through TIN FC / Online). This number is almost mandatory for financial transactions such as opening a bank account. and indicate the applicant through NSDL. It also serves as an important ID proof. Such form can be submitted online at NSDL website.

"T". Nowadays."F". DOI (Date of Issue) of PAN Card is mentioned at the right (vertical) hand side of the photo on pan card."L". then the PAN will be shown invalid  The fourth character of the PAN must be one of the following."H"."G". last character letter  Each assesse is uniquely identified by the PAN  If the PAN does not follow the above structure."B". .This number can be considered to be similar to United States to citizens and other legal residents Social security number issued in Structure and validation  PAN structure is as follows: AAAAA9999A: First five characters are letters."J"."A". In the case of Personal Pan card. next 4 numerals. where the fourth character is "C". where the fourth character is "P" or (b) of the name of the Entity/ Trust/ Society/ Organisation in the case of Company/ HUF/ Firm/ AOP/ BOI/ Local Authority/ Artificial Jurdical Person/ Govt. depending on the type of assesse: C — Company P — Person H — HUF(Hindu Undivided Family) F — Firm A — Association of Persons (AOP) T — AOP (Trust) B — Body of Individuals (BOI) L — Local Authority J — Artificial Juridical Person G — Govt  The fifth character of the PAN is the first character (a) of the surname / last name of the person.

issued to the deductee is a TDS certificate[5]. the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 27Q to the government. All the information of deductions and payments in this category should be submitted in Form 26Q to the government. Depending on the nature of the deduction being made. All the information of deductions and payments in this category should be submitted in Form 24Q to the government. 2. from whom the tax is being deducted or accrued for deduction[4]. . Salaries: In case of salaries. during the regular assessment of income tax. the deductee is termed as a Deductee or a Party. the deductee is termed as an Employee. Deductor is a person/company who is liable to deduct the Tax at source.Deductor Under the process of TDS.Resident: In case of non-salaries and the payment is made to a resident in India. to adjust the amount of TDS against the Tax payable by the Deductee [assessee]. deductees and respective submission forms are categorized to 4 types: 1. Non-Salaries . Deductee Deductee is the person. The deductee should produce the details of this certificate. from the payment being made to the party. 3. Non-Salaries – Nonresident: In case of non-salaries and the payment is made to a non-resident of India. The certification from the deductor. for the deduction and payment of the respective TDS amount to the bank. Deductor is also termed as Employer in cases where the payments are under Salaries[3]. TDS Certificates A tax deductor is also required to issue TDS certificate to the deductee within specified timed under section 203 of the I T Act.

So as per finance bill 2010 the prescribed threshold limit has increased and changed. the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details.000 30. Each section has its own prescribed limit to deduct tax at source (TDS). if it is above the prescribed limit by income tax act. Sl. This refers to the details submitted over Form 26Q and 27Q. The applicability date of changed threshold limit is July 1. This refers to the details submitted over Form 24Q. No. Separate certificates should be prepared for each Section [nature of payment].Form 16A: In case of Non-Salaries. the certificate should be issued in FORM 16A containing the Tax deducted & Paid details.[edit] Types of TDS certificates Salaries . However.000 . Sectio n Nature of payment 1 194B 2 194BB 3 194C Winnings from lottery or crossword puzzle Winnings from horse race Payment to contractors 4 194D Insurance commission threshold limit of payment (Rupees) 10. Non-salaries .000 transactions during the FY 20.Form 16: In case of Salaries.000 Remarks 5. Threshold Limit of TDS after Budget 2010 Every person is responsible for deduct tax at source on the payment of any specified amount to any person at the specified rates.000 For single transaction 75. 2010. no need to deduct tax at source (TDS) if the amount paid don’t be exceed to prescribed threshold limit by that particular section.

the vendor is the person subject to tax and the company code is obligated to deduct withholding tax and pay to tax authorities.000 1. SAP therefore recommends the use of extended withholding tax.000 SAP FUNCTIONALITY To calculate pay and report the withholding tax.000 30. we can process withholding tax from both the vendor and customer view. Generally the Accounts Payable perspective is used by majority of the implementing companies Define Withholding Tax countries Menu Path : IMG  Financial Accounting Financial Accounting Basic Settings  Withholding Tax  Extended Withholding Tax  Basic Settings  Check Withholding Tax Countries .5 194H 6 7 194-I 194J Commission or Brokerage Rent Fees for professional or technical services 5. From the Accounts Receivable perspective the company code itself is subject to tax and the customers that do business with the company deduct withholding tax and pay to the tax authorities. the SAP system provides two functions:  Classic Withholding tax  Extended Withholding tax Extended Withholding tax includes all the functions of classic withholding tax. With Extended Withholding tax.80. From the Accounts Payable perspective.

Key Name 193 Interest On Securities 194A Interest income other than securities 194C Payment to contractors 194H Commission & Brokerage 194I Rent Other . Menu Path : SPROFinancial Accounting (New) Financial Accounting Global Settings (New) Withholding TaxExtended Withholding Tax Basic Settings Define Withholding Tax Keys The below will be created as withholding tax keys Off.Define withholding tax keys Withholding tax keys are used to define withholding tax to be deducted under various sections of Income Tax.

Day Before . Menu Path : SPROFinancial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Basic Settings India Define Business Places The following business place have been maintained and when required further can be added as per states. Maintaing the same through SM30 : BBRANCHV Bus. As Business places were earlier used for withholding tax purposes still certain number ranges are maintained as per Business places.194J Prof/Technical services 195 Payment to foreign nationals Define Business Places Business places will be maintained and mapped to plants inorder to account for statewise VAT transactions. Place 9999 9998 Name Andhra Pradesh Orissa Assign Factory Calendars to Business Places In this activity. Factory Calendar is assigned to business place Menu Path : SPROFinancial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Basic Settings India Define Business Places Bus Place Factory Calender Tax due Date 9999 01 .Day Before 9998 01 .

depending on the withholding tax type and recipient type. We create one section code for local tax office that the enterprise report to.Vizag 9999 Andhra Pradesh 9998 Tata Steel . Because due dates can differ. Menu Path : SPRO Financial Accounting Financial Accounting Global Settings Withholding Tax Extended Withholding Tax South KoreaDefine Section Codes Sect.Maintain Tax due dates In this IMG activity. Place State 9999 TATA Steel . we can maintain the dates at this level. Menu Path : SPROFinancial Accounting Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Basic Settings India Maintain Tax Due Dates Country Off Key IN IN IN IN IN 194C 194C 194I 194I 194J Recipient type No of days until tax due date CO OT CO OT CO 777 10 777 10 777 Define Section Code In this IMG activity. Code Name Bus. we maintain the various tax due dates.Orissa 9998 Orissa Withholding tax type In this activity we define the withholding tax type responsible for deduction of EWT at the time of posting of an invoice. Menu Path : SPRO Financial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Calculation Withholding Tax Type Define Withholding Tax Type for invoice Posting Below withholding tax types for invoice posting will be created . we define the section codes that are covered by enterprise.

Invoice IH Commission & Brokerage .With t type Name IC Payment to Contractors .Invoice .Invoice IF Payment to Non Residents .Invoice II Rent Others – Invoice IJ Professional & Technical Fees .

Menu Path : SPRO Financial Accounting Financial Accounting Global Settings Withholding Tax Extended Withholding Tax Calculation Withholding Tax Type Define Withholding Tax Type for Payment Posting Below withholding tax types for Payment posting will be created With t type Name AC Payment to Contractors .Define withholding tax type for payment posting In this activity we define the withholding tax type responsible for deduction of EWT at the time of posting of payment.Invoice .

Invoice .Invoice AH Commission & Brokerage .Invoice AI Rent Others – Invoice AJ Professional & Technical Fees .With t type Name AF Payment to Non Residents .

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ty Text IN AA CO Company IN AA OT Other IN AC CO Company IN AC OT Other IN AF CO Company IN AF OT Other IN AH CO Company IN AH OT Other IN AI CO Company IN AI OT Other IN AJ CO Company IN AJ OT Other IN AS CO Company IN AS OT Other IN IA CO Company IN IA OT Other IN IC CO Company IN IC OT Other IN IF CO Company IN IF OT Other IN IH CO Company IN IH OT Other IN II CO Company .typ e Rec.Check Recipient Types Recipient types are maintained here for example Companies (CO) or (Others) The same are maintained at the vendor level to be used for various purposes for example to be printed in Form 16A. Menu Path : SPROFinancial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Basic Settings Check Recipient Types Cty Wth.t.

The rounding rules apply to posting of withholding tax amount.Cty Wth.Invoice Define rounding rule for withholding tax types Here we need to define the rounding rule for each withholding tax type.Invoice AS Interest On Securities .typ e Rec. Menu Path : SPRO Financial Accounting (New) Financial Accounting Global Settings (New) Withholding TaxExtended Withholding Tax Calculation Withholding Tax Type Define Rounding Rule for Withholding Tax Type Below is a same configuration entry to be maintained for all withholding tax types – invoice & payment Co code 9999 9999 9999 9999 9999 9999 9999 9999 With t type AA AC AF AH AI AJ AS IA Currency Unit INR 100 INR 100 INR 100 INR 100 INR 100 INR 100 INR 100 INR 100 .ty Text IN II OT Other IN IJ CO Company IN IJ OT Other IN IS CO Company IN IS OT Other AJ Professional & Technical Fees .t.

9999 9999 9999 9999 9999 9999 IC IF IH II IJ IS INR INR INR INR INR INR 100 100 100 100 100 100 Define Withholding tax codes In this activity we maintain the withholding tax codes under each section of income tax. This contains the percentage of amount subject to tax and the rate of deduction of EWT. Menu Path : SPRO Financial Accounting (New) Financial Accounting Global Settings Withholding Tax Extended Withholding Tax Calculation Withholding Tax Code Define Withholding Tax Codes .

Maintain surcharge rates In this activity we need to maintain the surcharge percentages with various combination of withholding tax type. Co Code With type t With code t Recipient type Surcharge Rate 9999 IC I1 CO 10 9999 AC A1 CO 10 Assign withholding tax type to company code In this activity we assign all the withholding tax types to company code . withholding tax codes and recipient types. Menu Path : SPRO Financial Accounting Financial Settings Withholding Tax Extended Tax Calculation India Surcharges Maintain Surcharge Combined with Basic WH Tax Codes) Accounting Global Withholding Rates (Surcharges Below is a same configuration entry to be maintained for all surcharge rates.

Co Code With tax type Company Name 9999 AA Tata Steel Limited 9999 AC Tata Steel Limited 9999 AF Tata Steel Limited 9999 AH Tata Steel Limited 9999 AI Tata Steel Limited 9999 AJ Tata Steel Limited 9999 AS Tata Steel Limited 9999 IA Tata Steel Limited 9999 IC Tata Steel Limited 9999 IF Tata Steel Limited 9999 IH Tata Steel Limited 9999 II Tata Steel Limited 9999 IJ Tata Steel Limited 9999 IS Tata Steel Limited Activate Extended Withholding tax In this activity Extended withholding tax is activated for particular company code.Menu Path : SPRO Financial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Company Code Assign Withholding Tax Types to Company Codes Below is a same configuration entry to be maintained for assigning the withholding tax types to company code. W/tax . Menu Path : SPRO Financial Settings  Withholding Tax Extended Extended Withholding Tax Co Code Accounting  Financial Accounting Global Withholding Tax Company Code Activate Company name Ext.

9999 Tata Steel Limited X Define accounts for withholding tax In this activity we define the withholding tax gl accounts for each withholding tax type and tax code combination Menu Path : SPRO Financial Accounting  Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Posting Accounts for Withholding Tax Define Accounts for Withholding Tax to be Paid Over Below is a same configuration entry to be maintained for assigning the withholding tax types to company code. Specify Document type .

SM30 – Table Maintenance for Table View J_1IEWTNUMGR_1 & Table view J_1IEWTNUMGR_N Number groups for each withholding tax key will be maintained. Assign number ranges to number groups In this activity number ranges are assigned to each number groups created in the above step.In this activity we maintain the doc type per company code to be created while creating an internal remittance challan Menu Path : SPRO Financial Accounting Financial Accounting Global Settings  Withholding Tax Extended Withholding Tax Posting India Remittance Challans Document Types Specify Document Type (Accounts Payable) SAP standard Doc type SA will be maintained for Co Code 9999 Maintain number groups In this activity number groups for internal remittance challan are maintained for each company code and off withholding tax key combination Transaction . Menu Path : SPRO Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Posting India Remittance Challans Assign Number Ranges to Number Groups Number grp IntNR .

official withholding tax key and number group combination. Place Off.01 02 03 04 05 06 07 11 12 13 14 15 16 17 01 02 03 04 05 06 07 11 12 13 14 15 16 17 Maintain number groups and SAP script forms In this activity we define the EWT certificate form for each company code. business place. CoCd Bus. Key Form Number grp 9999 9999 193 J_1IEWT_CERT 01 J_1IEWT_CERT 9999 9999 194A 02 J_1IEWT_CERT 9999 9999 194C 9999 9999 194H 03 J_1IEWT_CERT 04 J_1IEWT_CERT 9999 9999 194I 05 . Menu Path : SPRO Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Posting India Withholding Tax Certificates for Vendors and Customers Maintain Number Groups and SAPscript Forms SAP standard form J_1IEWT_CERT for EWT will be maintained.

Key Form Number grp J_1IEWT_CERT 9999 9999 194J 9999 9999 195 06 J_1IEWT_CERT 07 J_1IEWT_CERT 9999 2004 193 9999 2004 194A 11 J_1IEWT_CERT 12 J_1IEWT_CERT 9999 2004 194C 13 J_1IEWT_CERT 9999 2004 194H 9999 2004 194I 14 J_1IEWT_CERT 15 J_1IEWT_CERT 9999 2004 194J 9999 2004 195 16 J_1IEWT_CERT 17 J_1IEWT_CERT 9999 2010 193 9999 2010 194A 9999 2010 194C 11 J_1IEWT_CERT 12 J_1IEWT_CERT 13 J_1IEWT_CERT 9999 2010 194H 9999 9999 2010 2010 194I 194J 14 J_1IEWT_CERT 15 16 J_1IEWT_CERT . Place Off.CoCd Bus.

Create vendor code and maintain Tax Codes in Withholding tax field . Place Off. Key 9999 2010 195 Form Number grp J_1IEWT_CERT 17 Assign Number ranges to number groups In this activity the number ranges are assigned to the number group created above Menu Path : SPRO Financial Accounting (New) Financial Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Posting India Withholding Tax Certificates for Vendors and Customers Assign Number Ranges to Number Groups Number grp IntNR 01 02 03 04 05 06 07 11 12 13 14 15 16 17 01 02 03 04 05 06 07 11 12 13 14 15 16 17 END USER ACTIVITIES 1.CoCd Bus.

Run T-code: J1INMIS . Create Vendor liability – FB60/F-43 3.2.