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 business partner is a company or other than company, create recipient
type. Recipient type will be assigned in business partner 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
business partner master data.

Master Data Configuration:

Scenario 1: Business partner with PAN.

Creation of Business partner and Assign PAN as shown below.

Under Company code

Assign Tax Type, Tax code (Both Invoice and Payment) and Rec. Type.

Note: Create business partner master data and save the changes, then go to
change mode and maintaining PAN level TAN based exemption details.
Note: Exemption number (TDSU/S194Q) should be maintained in exemption details.

Scenario 2: Business partner 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 business partner and save the changes, then go to
change mode and maintain TAN exemptions details as shown above for PAN
scenarios.
Note: Exemption 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 business partner.