Tally Accounting
Posted by Asok K Nadhani on

TDS Accounts System Overview of Tally Accounting Software

Tax Deducted at Source (TDS) is a pre-tax deduction made at source (before payment) by the payer from the payment made to the payee. It is a mechanism of collecting tax by using a deduction mechanism rather than through payments made by the taxpayer. It is deducted at the time of payment, and directly deposited into the government (Income Tax Department’s) account.

TDS on Purchase of Goods / Assets : In case of Purchase of Goods / Property, TDS is deducted by the Buyer from Amount Payable to Seller, and TDS deposited with the Government.

  • TDS Deduction by Buyer : TDS on large sum purchase is deducted by Buyer, from the Seller’s account. The Buyer deposits the TDS to government. The TDS goes to the Account of seller, as Advance Income Tax paid.
  • TDS Deduction by Payer : TDS is deducted by Payer from Payee’s account for TDS Deductible Expenses (like Payment of Rent, Commission etc). The Deductor pays the TDS to Government. The TDS goes to the Account of Payee, as Advance Income Tax paid.

TDS is to be deducted even on receipt of Advance and deposited with government.

TDS Deductor : Any person making specified payments mentioned under the Income Tax Act is required to deduct TDS (called Deductor) from the Amount payable to Payee (Called Deductee) at the time of making such specified payment. Normally, Individual or HUF not required for Audit, need not deduct TDS. The Deductor is assigned unique TAN by the Income Tax authorities. TDS is to be deducted when the Payment to a specific payee exceeds  threshold limit specified by Department. Under certain conditions, TDS may be exempted.

TDS Masters in Tally

TDS Set up in Tally may be broadly classified as: TDS Set Up for Company at Company Features, TDS Masters creation, TDS set up in Ledger Accounts, TDS details entry in Vouchers  

TDS Set up in Tally Accounting Software: Activate TDS for the Company and record all required details for the organisation and Person responsible for TDS. Set the Company TDS Configuration options as desired. Set TDS rates, surcharge and other relevant options. You must collect and be ready with correct the info, before entry.

TDS Masters Creation in Tally Accounting Software : Now you have to create certain Masters exclusively for TDS. You must have activated TDS in the Company as explained, to create such Masters.

  • TDS Nature of Payment Master in Tally Accounting Software :  TDS Nature of Payment contains the details of each I T X sections for TDS and the applicable Nature of Payment. Tally helps to create TDS Nature of Payment Master providing ready list of TDS Nature of Payment. Alternately, TDS Nature of payment Master may created, by entering the required details (like TDS rate, exemption threshold limit etc). In  some cases, details are to be entered for each sub section (like 194J). Create only the relevant Items in TDS Nature of Payment Master, as applicable to the organisation.
  • TDS Ledger Account Master in Tally Accounting Software : The TDS is accounted in TDS ledger Account. Create TDS Ledger Account Master, by providing required info.

TDS details set up in Mastersin Tally Accounting Software: Apart from exclusive TDS related Masters creation, TDS details are also to be set up in certain Masters.

  • TDS Details set up in Expenses Ledger Account Master : In TDS Deductible Expenses (like Rent etc), activate TDS option in the Ledger Account Master and set up relevant TDS related details as required.
  • TDS Details set up in Deductee Ledger Account Master : For TDS Deductee Parties), activate TDS option in the Ledger Account Master, set up relevant TDS related details in Ledger Account Master and Ledger Account configuration options. A lot of TDS related info are required to set up. So collect all the info before setting TDS details in party ledger Accounts Master.
  • Higher Rate TDS for Specified Person : TDS at higher Rate (s.206A) would be applied persons having not filed ITR in previous 2 years or whose TDS Deduction is more than 50000 in 2 pervious years). Such Specified person may be identified from Income Tax portal by providing the PAN. Bulk PAN may be checked in one shot. Check at the beginning of Financial Year, and then check only for newly added Deductee. Make proper set up in respective Ledger Account Master for higher Rate TDS.
  • TDS Details set up in Purchase Items Master: TDS is to be paid by the buyer on purchase of Goods / Fixed Asset or Property, exceeding a threshold limit (whether Capital Goods or Expenses), from a single Vendor.
    • TDS Details set up in Fixed Asset ledger Account Master : TDS is to be activated for Fixed Asset for which TDS is applicable, and the required info to be set in the Fixed Asset.
    • TDS Details set up in Stock Item Master : TDS is to be activated for Stock Item, for which TDS is applicable, and the required info to be set in the Stock Item.
    • TDS Nature of Payment Master : For such Purchase, TDS Nature of Payment master need to be created for Transactions exceeding Threshold Limit and for Transactions Below Threshold Limit.

TDS Set up in Purchase Ledger AccountMaster in Tally Accounting Software : TDS related details to be set up for related TDS Deductible Purchase Account, linking the relevant TDS Nature of Payment Master. For Purchase transactions, relevant Purchase Ledger should be accounted for depending on transaction value.

The process of recording Purchase in Tally should be clearly understood as it introduces operational steps to fit into their own system.

Tracking of Threshold Limit for Parties and for Advance, for the purpose of TDS requires tracking by organisation. It is not auto implemented by Tally.

The adjustment of TDS on Advance amount is to be made depending on Purchase Value exceeds the Advance Amount or is below the Advance Amount.

TDS Vouchers in Tally Accounting Software

TDS Vouchers Types in Tally: TDS Vouchers may broadly classified for TDS Deduction and TDS Deposit to Government.

TDS Deduction Voucher from Party in Tally Accounting Software: TDS Deduction may be classified as :

  • TDS on Large Purchase : Buyer buys goods valued at Rs 1,00,000. From Seller. The Buyer pays Rs 99,000 to seller after deducting TDS of Rs 1,000 (@1% on Rs 1,00,000) and deposits the TDS of Rs 1000 to Government. So, Seller gets payment of Rs 99,000 for goods sold. Rs.1000 is credited to his account as Advance Tax paid.
  • TDS on Deductible Expense: Rs 30,000 sales commission is payable by Principal to Agent. Principal pays Rs 27,000 after deducting TDS of Rs 3,000 (10% of 30,000), and deposits Rs 3,000 with government. The amount of Rs 3000 is credited to Agent’s account as advance Income Tax paid.

TDS Deposit Voucher to Government in Tally Accounting Software : The TDS is to be deposited with Government through Bank, within scheduled time.

  • TDS Deposit by Deductor : The TDS deducted on making TDS deductible expenses, deposits the TDS to government. The TDS goes to the account of Deductee, as Advance Income Tax paid.
  • TDS Deposit by Buyer: TDS deducted on large value Products/ Assets purchase is deposited by Buyer. The TDS goes to the account of Seller, as Advance Income Tax paid.

TDS Deposit using Tally Accounting Software : The TDS deposit voucher is created in Tally, from the figures of TDS Outstanding Report. The Payment may be on line (those who have Net banking facilities). Alternatively, Bank Counter deposit challan may be created and printed from the I Tax Portal. The payment is to be deposited to respective Bank through the challan generated. On tax deposit, the amount is credited to the Assessee Account.    

TDS Reports in Tally Accounting Software

Tally provides TDS reports to help creation and tracking of Masters for wrong / inadequate data, and proper entry therein, to ensure correct TDS Statutory Reports.

  • Party Ledger Account Master list without PAN: DeducteeParty PAN is most Important data for TDS System. It must be correct. Print filtered List of Party Master in which PAN is not entered. Select Not Applicable at PAN, for Parties for which PAN is not applicable, but do no leave PAN field blank. You may update the PAN from the list.
  • Party Ledger Account Master list with PAN : Print the Party Ledger Account Master with PAN. Check the PAN and rectify in case of mistake in the list itself. The PAN will be updated in respective Party Ledger Master.

Once the PAN of a Party is verified, it is not necessary to check every time. But Tally will always list the Party ledger Master with PAN. There is not option to print in which PAN is entered / updated during a specified period, from date of Entry / updation. This makes the work burdensome.

  • TDS Outstanding Report in Tally Accounting Software: TDS deducted must be deposited with Government within specified time. Tally provides report of TFS deducted but not yet deposited, with complete details. This helps to deposit TDS to government within scheduled time.
  • TDS Outstanding Report of Deductee Type / Nature of Payment in Tally Accounting Software: This report give details of Deductee Type, Transaction Type as desired for proper filling up / Reconciliation of TDS Statutory Return.
  • TDS Reconciliation Report in Tally Accounting Software : It shows the complete details of Deduction and TDS challans for reconciliation of Deposit with TDS challans.

TDS Statutory Reports in Tally Accounting Software

TDS Statutory Returns in Tally Accounting Software :

 TDS Return Filing with Government

The report created by Tally cannot be filed with Government. Report in proper format  be created through a Conversion utility, downloaded from the site  (www.tin-nsdl.com).

Validation of TDS Return File : First, the TDS Challan File created by Tally is to validated through the FVU Utility, downloaded from site. FVU generates the validated file. Errors found, if any, are reported in Error File. Errors are to be rectified and the original file revalidated. Finally, the error free file is obtained.

Submission of Validated TDS Return File: The validated TDS Return report (Form 27A) is submitted alongwith 26Q/ 27Q in txt format (from Tally) and uploaded in the website.