Withholding Customizing Data:

Creation of Official Withholding tax Keys:

SPRO Path: Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding
Tax→ Extended Withholding Tax→ Basic Settings→ Define Withholding Tax Keys.

Creation of Invoice time Tax Type:

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Calculation→ Withholding Tax Type→ Define Withholding Tax Type for
Invoice Posting.
Creation of Payment time Tax Type:
Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Calculation→ Withholding Tax Type→ Define Withholding Tax Type for
Payment Posting

Creation of Tax Code:

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Calculation→ Withholding Tax Code→ Define Withholding Tax Codes.
Note: Create another tax code 5Q with tax rate 0.1% for payment time withholding tax.

Create other tax type and tax codes with 5% Tax rate for Non-PAN scenario for Invoice and Payment.

Assignment of Newly created Tax type to company code.

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Company Code→ Assign Withholding Tax Types to Company Codes

Similarly, do it for the other tax types.

Activate the extended withholding tax for your company code.

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Company Code→ Activate Extended Withholding Tax.

Assignment of G/L accounts to Tax Type Tax code

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Posting→ Accounts for Withholding Tax→ Define Accounts for
Withholding Tax to be Paid Over.

Similarly, do it for the other tax types.

Note: G/L account should be Open Item Management.

Map Invoice Time and Payment Time Tax Types and Tax Codes:

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Calculation→India-Exemptions and Reductions→TAN-Based
Exemption→Map Invoice Time and Payment Time Tax Types and Tax Codes.

Creation of Section code:

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Basic Settings→India→ Define Section Codes
Assignment of Tax Deduction and Collection account number (TAN) to Section code:

Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Withholding Tax→
Extended Withholding Tax→ Basic Settings→India→ Section Code, TAN, and CIT Address Mapping

Check Recipient Types:

To identify, wheatear the supplier is a company or other than company, create recipient type.
Recipient type will be assigned in supplier master data.

Financial Accounting Global Settings (New) →Withholding Tax→Extended Withholding Tax→Basic

Settings→ Check Recipient Types.

Define Reasons for Exemption:

Financial Accounting Global Settings (New) →Withholding Tax→Extended Withholding Tax→Basic

Settings→Define Reasons for Exemption.
Create Exemption reason 4Q which can be used while maintaining TAN based exemptions details in
vendor master data.

Master Data Configuration:

Scenario 1: Vendor with PAN.

Assign Tax Type and Tax code (Both Invoice and Payment) and maintain Rec.ty as well.

Note: Create vendor master data and save the changes, then go to change
transaction and Maintaining PAN level TAN based exemption in CIN tab.
Assign PAN as shown below.

Maintaining PAN level TAN based exemption details as shown below.

Note: Certificate Number (TDSU/S194Q) should be maintained in exemption details.

Scenario 2: Vendor without PAN.

PAN number can be blanked for 194Q vendor (If PAN number is not available then tax rate would be
5%).

Note: 1st Create the vendor master and save the changes, then maintain TAN
exemptions details as shown above for PAN scenarios.
Note: Certificate number (TDSU/S194Q) should be maintained in exemption
details, otherwise you cannot save the exemptions details for non-PAN scenarios.
Note: Previous year sales, gross receipts or turnover from the business carried on by buyer exceed
10 Crores then only assign withholding tax type and tax code in vendor master data.