Tax Deducted at Source (TDS) Set up in Tally

Tax Deducted at Source (TDS )- Scope & Applicability

Incomes from several sources are subjected to tax deduction at source. Such Tax will be deducted at time of payment or credit, whichever is earlier.  

As per I tax Rules, In case of certain prescribed payments (e. g. Interest, commission, brokerage, rent, etc.) the person making payment is required to deduct tax at source (TDS) at the prescribed rate. The payer is known as Deductor, and the payee, who receives the net payment is called the Deductee.

Tax Deduction and Collection Account Number (TAN)

Persons responsible for deducting or collecting tax TAN with National Securities Depository Limited (NSDL ), in Form 49B. NSDL will allot & intimate the TAN which will be required to be mentioned in all future correspondence relating to TDS/TCS. TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks.

Tax Deduction and Collection Account Number (TAN)  is a 10 digit alpha numeric number (e.g  BLRN00789B, where first 3 Alpha, like BLR (for Bangalore), indicates the location code, next 1 letter Alpha (like N), indicates the first alphabet of the deductor name, next 5 digit numeric number (like 00789) is the number within each location and lats Alpha (like B) is the check digit for security and verification.

TDS Accounting Cycle in Tally

• Service Seller (including Lender of Money) submits Services (or Interest ) Bill to the Service Receiver (or Borrower)
• Service Buyer (TDS Deductor) deducts TDS from the Service Bill and makes the balance payment to Seller (TDS Deductee)
• Deductor remits the Deducted TDS amount into Bank (Treasury). Bank (Treasury) remits the amount to the Government Account.
•  Deductor Issues Form 16A to Deductee for the TDS amount deducted
•  Deductor Files the e-TDS to NSDL.
•  NSDL uploads the e-TDS information to Income Tax Department.
• Deductee Files the Return with Form 16A to Income Tax Department

TDS Certificates

It is mandatory for all deductors to issue TDS certificates after generating and downloading the same from “TDS Reconciliation Analysis and Correction Enabling System” or http://www.tdscpc.gov.in (called TRACES Portal).

TDS Certificates downloaded only from TRACES Portal will be valid.  TDS Certificate is to be furnished within fifteen (15) days from the due date for filing TDS Return

TDS Activation for the Company in Tally

TDS Features set up for Company in Tally

Activate TDS for each of the Company which having TAN to deduct the TDS , as per rules, from the specific payments made.

At  Accounting Features screen  (F11: Features >Accounting Features) set  as follows :

• TDS Activation : At Enable Tax Deducted at Source, set Yes to Activate TDS Features for the Company
• TDS Details :  At Set / Alter TDS Details, set Yes , to get  Company TDS Deductor  Details screen , to enter the Company TDS Details as described next (§04).

FTDS Activation in Tally

PAN : At Accounting Features screen , at PAN / Income Tax Number, enter the Company PAN

Company PAN Details Entry in Tally

Company TDS Details set up in Tally

TDS Deductor Details entry in Tally

At TDS Deductor Details entry screen, enter the following details :

• Company TAN : At Tax Deduction & Collection Account Number, enter the 10 digit TAN (in the form of AAAA99999A, A represents an Alpha letter [A-Z] and 9 represents numeric digit [0-9]) of the Company allotted by the Income Tax Department. An error message will appear , if the TAN is not entered in proper Format

Invalid TAN Format error in Tally

• Company  HO TAN : At Head Office TAN Number, enter the head office  TAN, if any (else leave blank)
• Income Tax Circle / Ward: At Income Tax Circle / Ward, enter the Income Tax Circle / Ward Number where the Company is being assessed.

Deductor Type: At Deductor Type, select the Organisation constitution type (Government / Others) from the list .

Deductor Type List in Tally

• Proprietorship Firm : At Is Proprietorship Firm, set Yes, if it is Proprietorship Firm, else set No
• Officer Name : At Name of the Person Responsible, enter the name of the deductor Company official
• Officer Father Name : At Son / Daughter of, enter the Name of the Father of the deductor Company official (as entered above) responsible for deduction & deposit of TDS.
• Officer Designation: At Designation, enter the Deductor Company Designation of the official.

These details are printed in TDS Challan and other Reports.

TDS Statutory Masters in Tally

On activation of TDS, Tally internally uploads TDS related Statutory Masters as follows. At GoT>Display, select Statutory Info to get Statutory Master Menu.

Statutory Info Menu in Tally

TDS Nature of Payment List in Tally

AtStatutory Master Menu, select TDS nature of Payment to view TDS nature of Payment List, showing the various Nature of Payment as classified by I Tax Department.

TDS nature of Payment List in Tally

TDS Deductee Type List in Tally

AtStatutory Master Menu, select Deductee Types to get TDS Deductee Type List, showing the various Type of Deductee as classified by I Tax Department.

TDS Deductee Type List in Tally

Statutory Info Details Display in Tally

You may further view the details of any selected Item from the list TDS Nature of Payment & TDS Deductee Type, as described below:

• TDS Nature of Payment : AtTDS nature of Payment List (F-3B), drill down from a record to view the details of the selected Payment Nature , as follows:
• Full Name : At Full Name, the full Name of the Nature of Payment, as per I Tax Act / Rule, is displayed
• Section : At Section, the Applicable Section Number of Income Tax Act, 1961 is shown for information
• Payment Code : At Payment Code, the Payment Code, as specified by Income Tax Department, is shown, for information
• Single Bill Value Limit : At Single Bill Value Limit, the Limit over which a TDS is to be Deducted for Single Bill Value, is shown
• Section Name : At Section Name, the relevant Section Head of TDS deduction is shown, for information

TDS Nature of Payment Display in Tally

TDS  Deductee Type : AtTDS Deductee Type List , drill down from a record to view the details of the selected Deductee Type, as follows:

• Name: At Name, the Name of the Deductee Type is shown
• Residential Status: At Residential Status, Residential Status of the Deductee is shown (Resident / Non-Resident).
• Deductee Status: At Deductee Status, Deductee Status is shown (Company/ Non Company).

Note : The fields Active & Module Type is internal info of Tally

• Deductee TDS Details: The Table section displays following details in respect of each Nature of Payment :
• Nature of Payment: At Nature of Payment column, the Nature of Payments heading, applicable for the Deductee is listed
• Applicability : At Applicable From column, the respective dates of applicability for each Nature of Payment is shown.
• TDS: At TDS section, the applicable TDS Rate and TDS Exemption limit (ceiling of exemption) is shown
• Surcharge: At Surcharge section ,the applicable Surcharge Rate and corresponding Surcharge Exemption limit is shown
• Ed Cess : At Ed Cess section ,the applicable Education Cess Rate is shown
• Sec Ed Cess: At Sec Ed Cess section ,the applicable Secondary Education Cess Rate is shown

This way, the details of each Nature of Payment, as applicable for the Deductee are listed

Deductee Type Display in Tally

TDS Ledger Accounts creation in Tally

Ledger creation has been explained earlier. Here we describe the features exclusively related to TDS Ledger Account Master.  At Ledger Account Configuration screen (Click F12:Configure at  Ledger Account creation screen), you must have set Yes at  Allow Advanced entries for Masters & Allow Advanced Entries in TDS Master, at Ledger Account Configuration to activate advanced  Features of Ledger Accounts  & TDS.

Create separate ledger account for each type of TDS under the Group Duties & Taxes (or you may create a group TDS under duties and taxes and place the individual TDS ledger account under it). 

TDS Ledger creation in Tally

At TDS Ledger Account creation / alteration screen , enter the following details :

• Parent Group : At Under, select Duties & Taxes (or a Group created under Duties & Taxes)

Duty / Tax Type List

• Type of Duty /Tax: At Type of Duty /Tax, select TDS from the list
• Nature of Payment: At Nature of Payment, select the from the list, for the TDS Ledger Account

TDS Nature Type List

TDS set up in Party Ledger Accounts Master in Tally

Party Ledger creation has been explained earlier. We describe points exclusively related to

Ledger Creation / Alteration of the Party from whom TDS is deducted.

TDS details entry in Party Ledger Account Master in Tally

At Statutory Information section of the Party Ledger, enter as follows:

TDS Applicability :  At Is TDS Applicable, set Yes for the Party from whom TDS is deductible (else No for the Parties from whom TDS is not to be deducted). Consequently, the option Maintain Balances Bill by Bill is automatically se to Yes. This option is available for Ledger Accounts under Sundry Debtors, Sundry Creditors, Loans (Liability) and Loans & Advances.  Now further enter as follows (for the Parties for which you have set Yes):

• TDS Nature : At Treat TDS as Expenses , set :
• No where TDS Amount is deducted from the amount Payable to the Party. So, TDS is not company’s expenses
• Yes where the TDS is to be borne by the Company and paid to Government
• Organisation Type: At Deductee Type, select the Deductee Type from the list , according to the nature of constitution of the Party.

List of Deductee Type

• Party PAN : At Tax Information section of the Party Ledger, enter the Party PAN

Party PAN details entry in Party Ledger Account in Tally

Advanced Configuration set up for TDS in Accounts Ledger Master

Configuration Option set up

TDS set up for Expense Ledger Accounts Masters

Expense Ledger creation has been explained earlier. We describe points exclusively related to TDS, for Creation / Alteration of Expense Ledger from which TDS is deducted.

TDS set up for Expense Ledger Accounts Masters

At Statutory Information section of the Expense Ledger Account creation / alteration screen, enter as follows :

• TDS Applicability :  At Is TDS Applicable, set Yes for the Expense Ledger Account from whom TDS is deductible
• Payment Nature: At Default Nature of Payment, select the Nature of Payment from the list of TDS Nature of Payment, like at Company TDS Nature of Payment List

Nature of Payment List in Tally

Having set up the TDS options in Company Features, TDS & Party Ledgers, you may start voucher entry involving TDS.

TDS Quick set Up in Tally

We have described the initial set up for :

• Company Set Up
• TDS related Ledger Creation
• Expense Ledger
• Party Ledger
• TDS Ledger

Quick Set Up is only an alternate gateway for Statutory Info. You get the same screen if you select the individual options as explained earlier. So, if you set up through Individual options, you do not need to set up from Quick Option (and vice versa). Through Quick Set Up, you may set up the Ledger Accounts through Multiple Mode only

Instead of set up from the respective Features / Configuration options and Ledger Creation, you may set up these through a special Quick Set up menu option. This helps you to first create the environment correctly before you enter transactions related to TDS.

Quick Set Up Menu in Tally

At Gateway, select Quick Set Up to get Quick Set Up menu. At Quick Set Up menu., select Tax Deducted at Source to get Quick Set Up-Tax Deducted at Source screen.

TDS Quick Set Up screen in Tally

Now we discuss about the set Up through Quick Set Up screen. At Quick Set Up screen, click at the respective option to get the same screen that you get from respective options, as discussed earlier

• C: Company TDS Details : To get Company TDS Deductor Details screen ,to set the Deductor Particulars as explained.
• X: Expense Ledgers : To get Expense Ledger set up screen showing the list of all Expense Ledgers already created (Ledger Accounts under Direct / Indirect Expenses), like a multi mode Ledger Accounts creation screen. Select the Ledger Account for which TDS is to be deducted. Set Yes at Is TDS Applicable. Next at Default Nature of Payment, select the applicable Nature of Payment from the list.

This way, set the Default Nature of Payment for the respective Ledger Accounts. Press Ctrl+A to save the settings

TDS Quick set up for Expense Ledger Accounts Masters in Tally

• T :Tax Ledger Set Up : To get TDS Ledger set up screen showing the list of all Ledgers (under Duties & Taxes) already created, like a multi mode Ledger Accounts creation screen. Select the Ledger Account for which TDS is to be deducted . Next at Nature of Payment column, select the applicable Nature of Payment from the list of TDS Nature of Payment

This way, set the Nature of Payment for the respective Ledger Accounts. Press Ctrl+A to save the settings

TDS Quick Set Up TDS Ledger Accounts masters in Tally

• A: Party Ledgers : To get Party Ledger set up screen showing the list of all Party Ledger Accounts  (under Sundry Debtors/ Creditors ), like a multi mode Ledger Accounts creation screen in a tabular format. Select the Party Ledger Account for which TDS is to be deducted .  Set Yes at Is TDS Applicable. Next at Deductee Type column, select the applicable Deductee Type  from the list of Deductee Types. Next enter the PAN of the Party at PAN /IT No column.

This way, set the Deductee Type and PAN for the respective Ledger Accounts. Press Ctrl+A to save the settings.

TDS Quick Set up for Party Ledger Accounts in Tally

Now the initial set up are complete and the TDS environment is ready to enter TDS related transactions

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