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

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. This is governed under
Indian Income Tax Act, 1961, by the Central Board for Direct Taxes (CBDT)
and is part of the Department of Revenue managed by Indian Revenue Service (IRS),
under the Ministry of Finance, Govt. of India.

OVERVIEW

In simple terms, TDS is the tax getting deducted from the person receiving
the amount (Employee/Deductee) by the person paying such amount
(Employer/Deductor). This is applicable for certain types of payments, as
applicable under the Act[1].
In the process of TDS, deduction of tax is effected at the source when income
arises or accrues. Hence where any specified type of income arises or
accrues to any one, 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.
The tax so deducted at source by the payer, has to be deposited in the
Government treasury to the credit of Central Govt, within the specified time.
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.
Income from several sources is subjected to tax deduction at source.
Presently this concept of TDS is also used as an instrument in enlarging the
tax base. Some of such income subjected to TDS are salary, interest,
dividend, interest on securities, winnings from lottery, horse races,
commission and brokerage, rent, fees for professional and technical services,
payments to non-residents etc. 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. The person who is liable to deduct the Tax should obtain a
Tax Deduction Account Number

TAN before deducting such Tax. TAN should applied through Form No 49B
(prescribed under Income Tax Law). Such form can be submitted online at
NSDL website. OR can also be submitted at Tax Information Network
Facilitation Center (TIN-FC). These centers are established by NSDL (which is
an appointed intermediary by the Government) across India[2].
TAN Application should accompany a 'proof of identity' and a 'proof of
address' (photocopies) of the deductor. In case, the application is made
online, these documents need to be sent over mail (post/courier) to NSDL TAN Application division.
Once NSDL receives the TAN application along with said documents (either
through TIN FC / Online), the details are verified and then sent to Income Tax
Department. Once approved, Income Tax Department will allocate a unique
number, and indicate the applicant through NSDL.
TAN will be 10 characters' alpha numeric string comprising of 4 Alpha - 5
Numeric - 1 Alpha. [E.g.: BLRR02933A]. 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). Remaining
characters form a unique combination to get identified at Income Tax
Department.

Permanent Account Number (PAN)

is unique alphanumeric combination issued to all juristic entities identifiable
under the Indian Income Tax Act 1961. 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. It also serves as an important ID proof.
This number is almost mandatory for financial transactions such as opening
a bank account, receiving taxable salary or professional fees, sale or
purchase of assets above specified limits.
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.
The PAN is unique, national, and permanent. It is unaffected by a change of
address, even between states.

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, next 4
numerals, last character letter

Each assesse is uniquely identified by the PAN

If the PAN does not follow the above structure, then the PAN will be shown invalid

The fourth character of the PAN must be one of the following, 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. In the case of Personal Pan card, 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, where the fourth character
is "C","H","F","A","T","B","L","J","G".

Nowadays, DOI (Date of Issue) of PAN Card is mentioned at the right (vertical) hand side of the
photo on pan card.

Deductor

Under the process of TDS, Deductor is a person/company who is liable to

deduct the Tax at source, from the payment being made to the party.
Deductor is also termed as Employer in cases where the payments are under
Salaries[3].
Deductee

Deductee is the person, from whom the tax is being deducted or accrued for
deduction[4]. Depending on the nature of the deduction being made,
deductees and respective submission forms are categorized to 4 types:
1.

Salaries: In case of salaries, the deductee is termed as an Employee.

All the information of deductions and payments in this category should
be submitted in Form 24Q to the government.

2.

Non-Salaries - Resident: In case of non-salaries and the payment is

made to a resident in India, 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 26Q to the government.

3.

Non-Salaries Nonresident: In case of non-salaries and the payment is

made to a non-resident of India, 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.

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. The certification from the
deductor, for the deduction and payment of the respective TDS amount to
the bank, issued to the deductee is a TDS certificate[5].
The deductee should produce the details of this certificate, during the
regular assessment of income tax, to adjust the amount of TDS against the
Tax payable by the Deductee [assessee].

[edit] Types of TDS certificates

Salaries - Form 16: In case of Salaries, the certificate should be issued in

FORM 16 containing the Tax computation details and the Tax deducted & Paid
details. This refers to the details submitted over Form 24Q.
Non-salaries - Form 16A: In case of Non-Salaries, the certificate should be
issued in FORM 16A containing the Tax deducted & Paid details. Separate
certificates should be prepared for each Section [nature of payment]. This
refers to the details submitted over Form 26Q and 27Q.

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, if it is above the
prescribed limit by income tax act. Each section has its own prescribed limit to
deduct tax at source (TDS). However, no need to deduct tax at source (TDS)
if the amount paid dont be exceed to prescribed threshold limit by that
particular section. So as per finance bill 2010 the prescribed threshold limit has
increased and changed. The applicability date of changed threshold limit is
July 1, 2010.

Sl. No.

Sectio
n

Nature of payment

194B

194BB

194C

Winnings from lottery or

crossword puzzle
Winnings from horse
race
Payment to contractors

194D

Insurance commission

threshold
limit of
payment
(Rupees)
10,000

Remarks

5,000
30,000 For single transaction
75,000 transactions during the
FY
20,000

194H

6
7

194-I
194J

Commission or
Brokerage
Rent
Fees for professional or
technical services

5,000
1,80,000
30,000

SAP FUNCTIONALITY
To calculate pay and report the withholding tax, the SAP system provides two
functions:

Classic Withholding tax

Extended Withholding tax

Extended Withholding tax includes all the functions of classic withholding

tax; SAP therefore recommends the use of extended withholding tax.
With Extended Withholding tax, we can process withholding tax from both
the vendor and customer view. From the Accounts Payable perspective, the vendor
is the person subject to tax and the company code is obligated to deduct
withholding tax and pay to tax authorities. 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.
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

Define withholding tax keys

Withholding tax keys are used to define withholding tax to be deducted under various
sections of Income Tax.
Menu Path : SPROFinancial Accounting (New) Financial Accounting Global Settings
(New) Withholding TaxExtended Withholding Tax Basic Settings Define
Withholding Tax Keys
The below will be created as withholding tax keys

Off. Key

Name

193

Interest On Securities

194A

Interest income other than securities

194C

Payment to contractors

194H

Commission & Brokerage

194I

Rent Other

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. As Business places were earlier used for withholding tax
purposes still certain number ranges are maintained as per Business places.
Menu Path : SPROFinancial 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. 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 : SPROFinancial 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

- Day Before

Maintain Tax due dates

In this IMG activity, we maintain the various tax due dates. Because due dates can differ,
depending on the withholding tax type and recipient type, we can maintain the dates at
this level.
Menu Path : SPROFinancial 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, we define the section codes that are covered by enterprise. We create
one section code for local tax office that the enterprise report to.
Menu Path : SPRO Financial Accounting Financial Accounting Global
Settings Withholding Tax Extended Withholding Tax South KoreaDefine Section
Codes
Sect. Code

Name

Bus. Place

State

9999

TATA Steel - Vizag

9999

Andhra Pradesh

9998

Tata Steel - 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

With t type

Name

IC

Payment to Contractors - Invoice

IF

Payment to Non Residents - Invoice

IH

Commission & Brokerage - Invoice

II

Rent Others Invoice

IJ

Professional & Technical Fees - Invoice

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.
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 - Invoice

With t type

Name

AF

Payment to Non Residents - Invoice

AH

Commission & Brokerage - Invoice

AI

Rent Others Invoice

AJ

Professional & Technical Fees - Invoice

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 : SPROFinancial Accounting Financial Accounting Global
Settings Withholding Tax Extended Withholding Tax Basic Settings Check
Recipient Types

Cty

Wth.t.typ
e

Rec.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

Cty

Wth.t.typ
e

Rec.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 - Invoice

AS

Interest On Securities - Invoice

Define rounding rule for withholding tax types

Here we need to define the rounding rule for each withholding tax type. The rounding
rules apply to posting of withholding tax amount.
Menu Path : SPRO Financial Accounting (New) Financial Accounting Global
Settings
(New) Withholding
TaxExtended
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

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, 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
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

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.

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
Settings Withholding Tax Extended
Extended Withholding Tax

Co Code

Accounting Financial
Accounting
Global
Withholding Tax Company Code Activate

Company name

Ext.
W/tax

9999

Tata Steel Limited

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

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 - 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.
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

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,
official withholding tax key and number group combination.
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.

CoCd

Bus.
Place

Off.
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

CoCd

Bus.
Place

Off.
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

CoCd

Bus.
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. Create vendor code and maintain Tax Codes in Withholding tax field

2. Create Vendor liability FB60/F-43

3. Run T-code: J1INMIS