TDS Document

Oracle Applications: India Localization
Oracle Application India Localization

User Reference Manual
For
Tax Deduction at Source
KPIT Cummins Infosystems Limited

Plot No. 35/36, Rajiv Gandhi Infotech Park,Phase I, MIDC, Hinjwadi, PUNE-411057, India
Tel: +91 20 5652 5000, Fax: +91 20 5652 5001
www.kpitcummins.com
KPIT Tax Deduction at Source2.0 .doc
Page 1 of 34
Table of Contents
Tax Deduction at Source ............................................................................3
1. Background ................................................................................................ 3
Objective of TDS ..................................................................................................... 3
Where is it applicable? ............................................................................................ 3
TDS in India............................................................................................................ 4
2. Setting up TDS functionality of India Localization. ...................................... 5

Define
Define
Define
Define
Define
Define
Define
Define
Define
Define
Define
Organization TAN Number. ............................................................................ 6

Tax Authority for Income Tax (TDS Authority) ............................................... 7
TDS Sections ................................................................................................ 8
TDS Vendor Types ........................................................................................ 9
Tax Codes for TDS ...................................................................................... 10
TDS Year .................................................................................................... 11
TDS Threshold Limits ................................................................................. 12
Supplier Additional Information for TDS Details .......................................... 14
Transaction Types for TDS Credit Memo...................................................... 16
Transaction Source for TDS Credit Memo .................................................... 17
Customer Additional Information ................................................................ 18
3. Using TDS Functionality in Oracle Applications (Transactions) ................... 19

Handling TDS Deduction in Oracle Payables ........................................................... 20
TDS Deduction on Transactions............................................................................................... 20
Payment to TDS Authority........................................................................................................ 24
Generating TDS Certificates..................................................................................................... 25
Handling eTDS.......................................................................................................................... 29
Handling TDS Deduction in Oracle Receivables ...................................................... 31
Receiving and Entering TDS Certificates................................................................................. 31
Creating Credit Memos for the Amount Deducted .................................................................. 32
4. Standard Reports Related to TDS .............................................................. 34

1.
2.
3.
India - TDS at Lower Rates Report.................................................................................. 34

India - TDS Related Invoices............................................................................................ 34
India - TDS Prescribed Rate Report................................................................................. 34
Page 2 of 34
Tax Deduction at Source

1. Background
Tax Deducted at Source (TDS) is one of the methods of collecting income tax
from the income tax payers or assessees in India. In such cases, tax is directly
collected at the source at which the income arises or generates. Whenever any
specified type of income arises or accrues to an entity, Income Tax Act calls for the
deduction of a specific percentage of such income, and payment of only the
remaining amount to the recipient of such income.
TDS is a common practice in all the countries of the world.
Objective of TDS
Tax Deducted at Source was introduced in India to facilitate the payment of
tax while receiving the income and it follows the concept of Pay as you earn.
However, the purpose of tax deducted at source is changing slowly. Now, the
objectives of tax deducted at source are:
1. To enable the salaried people to pay the tax as they earn every month. This
helps the salaried persons in paying the tax in easy installments and avoids
the burden of a lump sum payment.
2. To collect the tax at the time of payment of income to various assessees
such as contractors, professionals etc.
3. Government requires funds throughout the year. Hence, advance tax and
tax deducted at source help the government to get funds throughout the
year and run the government smoothly.
4. It helps to spread the tax net wide enough to include persons who might
otherwise have evaded taxes. The minimum thresholds are raised and the
rates are reasonable and comparable with the rates prevailing in other
countries. Hence, it is very vital to make all the persons earning the taxable
income pay the tax. But, the best way to make them pay is to deduct tax at
source.
Where is it applicable?
Tax deducted in this manner needs to be deposited in the Government
treasury and assigned to the Central Government, within a stipulated time period.
Indian Government is adhering to the policy of TDS to broaden its tax bracket in
the country. Income gained through several sources falls under the tax deduction
at source or TDS scheme. Some of such incomes that are subjected to Tax
Deduction at Source are as follows:
Salary
Interest
Rental fee
Interest on Securities
Insurance commission
Dividends from shares and UTI/Mutual Funds
Commission and brokerage
Prize money won from lotteries, horse races, etc
Payments to non-resident sportsmen or sports associations
Page 3 of 34
Commission on sale of lottery tickets

Fees for professional and technical services and the like
Compensation for compulsory acquisition
Income from units of an offshore fund
Income from foreign currency bonds or shares of Indian Companies
(unless specified as tax-free)
TDS in India
The Income Tax Act provides that the responsibility of deduction and
payment of taxes lies with the taxpayer. The person entitled to the income shall be
entitled to claim based on the certificates provided by the taxpayer, the deducted
amount of tax from his total tax liability. However, the taxpayer shall be liable for
penalties if the tax is not deducted and paid to government according to the
provisions of the Income Tax Act.
The liability of tax arises on the credit to the account of the Vendor or on
Payment whichever is earlier. When a prepayment is to be applied to the Invoice,
TDS should not be deducted or it should be adjusted from the Invoice to the extent
it was deducted from Prepayment.
Every person who has to deduct tax at source has to obtain Tax Deducted at
source Number (TAN) and it has to be quoted in all TDS challans, Returns and
Certificates. Each unit or branch of the organization which is liable to deduct tax
has to obtain a separate TAN.
Tax Deducted at Source has to be deposited with the Central Government
within the prescribed time limit by using the appropriate challan. TDS has to be
remitted within one week from the last day of the month in which the deduction is
made.
However, if the amount is credited on the last day of the financial year, i.e.,
on 31st March, then the tax deducted can be deposited within two months from
the end of the financial year, i.e., within 31st May. But, if it was credited or paid
even on 30th March, then you will have time only up to 7th April. This extended
two months time is available only in the case of the following items for which the
payees account is credited on the last day of the financial year:
Interest on Securities (Sec 193).
Interest other than Interest on Securities (Sec 194A).
Payments to contractors and sub-contractors (Sec 194C).
Insurance Commission (Sec 194D).
Payments to non-resident sportsmen or sports associations (Sec 194E).
Commission etc. on the sale of lottery tickets (Sec 194G).
Commission or brokerage (Sec 194H).
Rent (Sec 194-I).
Fees for professional or technical services (Sec 194J).
Other Sums (Sec 195).
Income in respect of units of non-residents (Sec 196A).
Income from Units (Sec 196B).
Income from foreign currency bonds or shares of Indian company (Sec
196C).
Income of Foreign Institutional Investors from securities (Sec 196D).
Page 4 of 34
2. Setting up TDS functionality of India Localization.

The following setups are required for TDS functionality of India Localization.
Step 1
Required Define Organization TAN Number
Step 2
Required Define TDS Authority
Step 3
Required Define TDS Sections
Step 4
Required Define TDS Vendor Types
Step 5
Required Define TDS Tax Codes
Step 6
Required Define TDS Year Information
Step 7
Optional
Step 8
Required Define Supplier Additional Information
Step 9
Required Define Transaction Types for TDS Credit Memo
Define TDS Threshold Limits
Step 10 Required Define Transaction Source for TDS Credit Memo

Step 11 Required Define Customer Additional Information
Page 5 of 34
Define Organization TAN Number.

If you plan to use the TDS functionality for an Organization, it would
become mandatory for you to enter the Income Tax Registration details in the
India Org. Info context of the DFF attached to the Organization screen. This setup
needs to be done either at the Legal Entity level or at the Operating Unit level. This
setup cannot be done for Inventory Organizations.
Impact of Organization TAN Number on transactions?
The value entered in the TAN No. field would be of great importance to you.
This would be the basis on which the TDS Threshold limits would be
calculated.
If the TAN No. is defined only for the Legal Entity, then Invoices generated
for all supplier sites defined under different Organizations would be
considered for the calculation of Threshold limits.
If TAN No. is defined for an Operating Unit, then only the Invoices defined
for this Organization would be considered for the calculation of the
Threshold Limits, unless the TAN No. for two Operating units is the same.
For Operating Units with no TAN Number, the TAN No. of the Legal Entity
would be considered and the Invoices of all such Operating Units would be
added to /considered for the calculation of Threshold Limits.
Also, Organizations with same TAN Number shall share the document
sequence followed for generation of TDS Certificates.
TAN No. once saved, should not be updated.
Page 6 of 34
Define Tax Authority for Income Tax (TDS Authority)

The liability arising from the Income Tax Deducted at source, while making
supplier payments needs to be accounted against an Income Tax Authority. You
would create a Supplier and Site for this Authority. Additionally, in the Type field
on the Classification tab, choose Tax Authority-IND. On doing this, when defining
a Tax Deduction at Source Type of Tax, the Supplier name would be listed in the
Vendor field LOV on the Tax Definition screen.
Page 7 of 34
Define TDS Sections

India Localization comes with preseeded, default TDS Sections in the
database. However, you should review these default sections and decide whether
to change them to suit your business needs. If you want or need to change them,
you should query on the TDS_Sections from the Purchase Lookup Codes and add
a new record, with the relevant descriptions and the effective period. As the same
codes are also used for the Works Contract Tax applicable in you state, you might
prefer to a new records for defining the relevant sections.
Page 8 of 34
Define TDS Vendor Types

India Localization comes with preseeded, default TDS Vendor Types in the
database. However, you should review these default types and decide whether to
change them to suit your business needs. If you want or need to change them, you
should query on the TDS Vendor Type from the Purchase Lookup Codes and add
a new record, with the relevant descriptions and the effective period.
Page 9 of 34
Define Tax Codes for TDS

You would use the Tax Definition screen to define the TDS Codes. Choose
the Tax Deduction at Source option in the Type LOV. Select the Vendor Name,
Vendor Site, Account and TDS Section No. Enter the value in the Percentage and
Rounding Factor fields. Enter the value in the Surcharge field, wherever
necessary.
Whenever, there is a change in the TDS Rates or Rates of Surcharge, user has
to do the following to ensure that correct rate of TDS is applied to the transactions
1. Close the existing Tax Code by entering the 'Effective To' date.
2. Create a new Tax Code with the revised rates
3. Navigate to Supplier Additional Information, query for the Supplier, Supplier
Site.
4. Replace the Default TDS Tax Name with the new Tax Code.
Page 10 of 34
Define TDS Year

Before you start using the TDS functionality in an Organization, you will
have to setup TDS Year Information. This year would be the Income Tax Reporting
Year and is independent of the Tax.
Page 11 of 34
Define TDS Threshold Limits

You can define TDS Threshold for a Vendor Type and TDS Section Code
combination. You can define Thresholds for Single Invoice as well as Cumulative
Invoice Thresholds.
You can setup TDS Threshold Limits for a combination of:
Vendor Type
Section Type
The above setup can be used as a default setup across Vendor Types. If you
wish to setup different Threshold Limits for certain Vendors, you can do the same
by setting up "Exception Setup". You can define as many "Exception Setups" as
desired.
Single Threshold applies to a certain transaction only. If this Threshold is
setup with a monetary limit, TDS will be deducted every time the current Invoice
Amount exceeds the Threshold Amount. Those Invoices, which are lower than the
Threshold Amount, will be ignored for TDS Calculation.
Cumulative Threshold applies to aggregate of all Invoices for the Financial
Year. If this Threshold is setup with a monetary limit; TDS will be deducted on all
the Invoices after this monetary limit is reached. In case of the Invoice, due to
which the Threshold Limit is reached, TDS will be calculated on all the earlier
Invoices also (that were ignored TDS Calculation).
In case both TDS Thresholds are setup with a monetary limit, Single Invoice
Threshold will operate only if the Cumulative Invoice Threshold is not reached.
Once Cumulative Invoice Threshold is reached, Single Invoice Threshold will be
ignored.
You have a flexibility to specify Effective Dates for each TDS Thresholds.
These Effective Dates are validated / compared against the accounting date of the
Invoice distributions and TDS Thresholds will operate only between these Effective
Dates. Once an end date has been put a particular TDS Threshold, you can define
a New TDS Threshold for that particular Threshold Type. Using this flexibility you
can take care of the Threshold modifications happening from time to time without
modifying any setup at the individual Vendor level.
Page 12 of 34
Click on New to Define New
Page 13 of 34
Define Supplier Additional Information for TDS Details

For the supplier for whom the TDS has to be calculated, recorded and
reported, you will have to define the TDS Details in the Supplier Additional
Information. You would define the Registration Details and the Applicable TDS
Sections and TDS Tax Code that has to default for the transaction created for the
Supplier.
TDS Details for the Supplier NULL Site
Page 14 of 34
Where the Registration and the Tax calculation details are the same for all
supplier sites, you can define the TDS Details for the Supplier NULL Site.
The same details would be applicable for all transactions created any of the
Sites.
Where the TDS Details are different for the Sites, you can define the
Registration Details at the Supplier NULL Site. For all the sites setup made
for this Supplier, the TAN No and Ward Number defaults. You will have to
enter the TAN No. and the TDS TAX Name and the relevant TDS Sections. If
you have not entered the default TDS Tax Code in the TDS TAX Name field,
for the supplier site, then the TDS TAX Name defined at the Supplier NULL
Site would be considered for the Invoice.
The Approval of TDS related information would depend on the value in the
Create Pre-Approved TDS Invoice & Credit Memo Field.
Page 15 of 34
Define Transaction Types for TDS Credit Memo
Page 16 of 34
Define Transaction Source for TDS Credit Memo
Page 17 of 34
Define Customer Additional Information
Page 18 of 34
3. Using TDS Functionality in Oracle Applications (Transactions)

We have divided this topic in 3 parts to keep this manual easy to
understand, for those who refer this. These are as follows
TDS Deduction on Transaction: The liability of tax arises on the credit to
the account of the Vendor or on Payment whichever is earlier. In Oracle Payables
one shall deduct TDS on either Prepayments or Standard Invoices. When a
prepayment is to be applied to the Invoice, TDS should not be deducted or it
should be adjusted from the Invoice to the extent it was deducted from
Prepayment.
Payment to TDS Authority covers the Payment additional Information for
the payments made to the TDS authority. This information is printed on the TDS
Certificates issued from Oracle Payables.
Generation of TDS Certificates cover the process to generate TDS
Certificates from Oracle Payables. You can generate TDS certificate to be issued as
per the Income Tax Act. Based on the TDS section and Tax authority, you should
first generate the TDS certificate. One TDS certificate can be issued for all the TDS
deductions for a vendor based on the transaction range or individual TDS
certificates can be generated for each TDS deduction.
Page 19 of 34
Handling TDS Deduction in Oracle Payables

TDS Deduction on Transactions
Navigate to Invoices Window
Create a Prepayment or Standard Invoices (We are taking Example of Standard

Invoice). You can chose the imported/Matched Invoices also.
Page 20 of 34
Fill up the India Localization DFF (India Distributions) in the Invoice

Distribution or if the Default Tax Code is set in the Supplier Additional
Information then the TDS Tax Code will appear automatically.
Validate the Invoice (If approval is required, then get the Invoice Approved)
Page 21 of 34
On the First Validation of the Invoice the System triggers Import TDS invoices invoice validate (Payables Open Interface Import)
On completion of this concurrent system creates Credit Memo for the

Supplier and a Standard Invoice for the Income Tax Authority. Search the Base
Invoice with the % string in the Query Mode.
Page 22 of 34
Page 23 of 34
Payment to TDS Authority

Make Payment to the TDS Authority. (TDS authority is paid on monthly
basis so it will be a good option to use Batch Payments functionality)
In whatever method the payment is made, the DFF (India Payment
Information) of the Payment Screen must be filled with the TDS Challan
Information
This Information is printed on the TDS Certificates issued by Oracle Payables.

Challan NO. is a Numeric only Field.
Page 24 of 34
Generating TDS Certificates

You can generate TDS Certificate to be issued as per the Income Tax Act. Based on
the TDS Section and Tax Authority, you should first generate the TDS Certificate.
One TDS Certificate can be issued for all the TDS deductions for a Vendor based
on the transaction range or individual TDS Certificates can be generated for each
TDS Deduction.
The following Concurrent need to be run in sequence: India - Process TDS Payments
India - Generate TDS Certificates
India - TDS Certificates
India - Process TDS Payments
This concurrent processes only for those Invoices where TDS deducted has
been remitted to the Tax Authority. Payments to the Tax Authorities can be done
either by paying the TDS Invoices (generated on validation of supplier invoice) or
by applying a prepayment invoice to the TDS Invoice.
Page 25 of 34
India - Generate TDS Certificates
TDS Certificates would be generated only for those Invoices which are
processed by the India - Process TDS Payments
This Concurrent creates the TDS Certificates. These Certificates can be seen
in the View TDS Certificates Window.
Page 26 of 34
Print Flag
Once the certificate is printed the Flag is changed to Y from N
Page 27 of 34
India - TDS Certificates
This Concurrent is the concurrent which creates a printable Layout of the

TDS Certificates. This concurrent can be run multiple times for the printing
purposes, however, the Date of Issue (printed on the TDS Certificate) would be the
systems date and not the date of generation (i.e. running the Concurrent India
Generate TDS Certificates).
TDS Certificate (Form 16A Report)
India_-_TDS_Certificates.txt
India_TDS_Certificates.htm
Page 28 of 34
Handling eTDS
You can generate eTDS Returns using 'India Program to Generate eTDS
Certificates' Concurrent program. Prior to that you should completed validating
Supplier Invoices and made payments to Invoices generated for TDS Authorities.
The concurrent program should be run for for a Particular TAN Number for a given
financial year.
As the output would be flat file, the users would be provided with an option
to generate the file with separators and Headers. The file can be generated in this
format by checking 'Generate Headers' parameter of the Concurrent request. Using
this file user can check the records and the appropriate values. On finding that
the data is correct, you can choose select the file with same parameters, without
headers. The file would be saved at the path specified in the utl_file_dir parameter
of the Database.
India - Program to Generate eTDS Certificates
eTDS Certificates.txt
India_eTDS_Certificates.htm
Page 29 of 34
India - Program to Generate eTDS Quarterly Certificates
Quarterly eTDS Certificates.txt
India_Quarterly_eTDS_Certificates.htm
Page 30 of 34
Handling TDS Deduction in Oracle Receivables

Receiving and Entering TDS Certificates
Navigate to Collection: TDS Certificates
Provide the Details of the TDS Certificates
On saving the transaction, the system creates lines in the Interface for
Credit memo.
Page 31 of 34
Creating Credit Memos for the Amount Deducted

Run Autoinvoice Master Program
View the Transaction
Page 32 of 34
Page 33 of 34
4. Standard Reports Related to TDS

It is a pre-requisite to run the Generate TDS Certificates to view the data in India
TDS Prescribed Rates Report and; India TDS Lower Rates Report.
1. India - TDS at Lower Rates Report

Use TDS at lower rates Report to calculate Tax deducted at source for a company
or others for various TDS categories like Rent, Technical/ Professional services,
Payments to contractors/Subcontractors etc.
2. India - TDS Related Invoices

This Report provides with the list of All Invoices for which TDS has been
calculated. For each such Invoice, all TDS Related Invoices generated for the
Invoice are shown.
India_-_TDS_Related_Invoices.txt
India_TDS_Related_Invoices.htm
3. India - TDS Prescribed Rate Report

Use TDS at prescribed rate Report to calculate Tax deducted at source for a
company or others for various TDS categories like Rent, Technical/ Professional
services, Payments to contractors/Subcontractors etc.
India_-_TDS_Prescribed_Rate.txt
India_TDS_Prescribed_Rate_Report.htm
Page 34 of 34

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Oracle Applications: India Localization

Oracle Application India Localization

KPIT Cummins Infosystems Limited

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

2. Setting up TDS functionality of India Localization. ...................................... 5

Organization TAN Number. ............................................................................ 6

3. Using TDS Functionality in Oracle Applications (Transactions) ................... 19

4. Standard Reports Related to TDS .............................................................. 34

India - TDS at Lower Rates Report.................................................................................. 34

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Tax Deduction at Source

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Commission on sale of lottery tickets

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

2. Setting up TDS functionality of India Localization.

Required Define Organization TAN Number

Required Define TDS Authority

Required Define TDS Sections

Required Define TDS Vendor Types

Required Define TDS Tax Codes

Required Define TDS Year Information

Required Define Supplier Additional Information

Required Define Transaction Types for TDS Credit Memo

Define TDS Threshold Limits

Step 10 Required Define Transaction Source for TDS Credit Memo

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define Organization TAN Number.

Impact of Organization TAN Number on transactions?

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define Tax Authority for Income Tax (TDS Authority)

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define TDS Sections

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define TDS Vendor Types

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define Tax Codes for TDS

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define TDS Year

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define TDS Threshold Limits

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Click on New to Define New

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define Supplier Additional Information for TDS Details

TDS Details for the Supplier NULL Site

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

KPIT Tax Deduction at Source2.0 .doc

Oracle Applications: India Localization

Define Transaction Types for TDS Credit Memo