User Guide | PUBLIC

2021-10-09

How to Work with TCS in the India Localization of

SAP Business One
© 2022 SAP SE or an SAP affiliate company. All rights reserved.

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Content

1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Enabling Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3 Settings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Setting TCS Accumulation Base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.2 Defining TCS Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Mapping TCS Codes to Business Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4 Marketing Documents for A/R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5 Incoming Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

6 Marketing Documents for A/P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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Document History

The following table provides an overview of the most important document changes.

Version Date Description

1.0 2021-10-20 First version

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Document History PUBLIC 3
1 Introduction

This how-to guide helps you to work with Tax Collected at Source (TCS) requirements under Sec 206C (1H) in
the India localization of SAP Business One and SAP Business One, version for SAP HANA.

TCS is a legal requirement in India. Finance Bill 2020 has inserted a new provision - Sec 206C (1H) which
extends the TCS provisions for the seller of goods. The new provision provides that if a seller (being a person
whose turnover in the previous financial year exceeds 10 Crores) makes a sale of “goods” whose value, either
individually or in aggregate exceeds 50 Lacs, the seller shall collect tax at source at specified rates on the value
of sale consideration exceeding 50 Lacs from the buyer.

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2 Enabling Withholding Tax

You need to enable withholding tax at the company level before you can use the TCS functionality.

From the SAP Business One Main Menu, choose Administration Setup Financials G/L Account
Determination

To enable TCS for A/R and A/P transactions, select the Withholding Tax checkbox both under the Sales tab, Tax
subtab and also under the Purchasing tab, Tax subtab.

You can set all items as withholding tax/TCS liable by default.

From the SAP Business One Main Menu, choose the Administration System Initialization General Setting
Inventory Items subtab, and select the Withholding Tax checkbox.

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Alternatively, you can set the withholding tax/TCS liable in the item master data of the relevant items.

From the SAP Business One Main Menu, choose Inventory Item Master Data . Find the relevant item and,
in the General tab, select the Withholding Tax Liable checkbox.

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Eventually, the item’s withholding setting can be defined in the document creation and this will determine
whether the TCS will be calculated in this document for the item or not, regardless of what the setting in the
item master data is.

Create a new A/R or A/P invoice, select the business partner and the item, and in the item’s row, select Yes or
No in the WTax Liable column.

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 How to Work with TCS in the India Localization of SAP Business One
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3 Settings

Settings in SAP Business One allow TCS functionality to operate and conform to the legal and reporting
requirements of the tax authorities in India for Sec 206C (1H).

3.1 Setting TCS Accumulation Base

You can choose at which stage the tax will be applied; in the invoice creation or in the payment creation.

From the SAP Business One Main Menu, choose Administration Setup Financials TDS Financial
Year Master .

In the Financial Year Master - Setup Tax window, TCS Accumulate Base column, choose Accumulate Based on
Invoicefrom the dropdown list, or Accumulate Based on Payment for a specific financial year.

 Caution

You should define this setting at the beginning of the financial year. However, if you choose to change the
based method at any time, the accumulation amount for all business partners will be cleared.

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3.2 Defining TCS Codes

From the SAP Business One Main Menu, choose Administration Setup Financials Tax TCS
Withholding Tax .

In the TCS Withholding Tax - Setup window, define all the settings, during which you must define the following:

• Cumulative Threshold: currently it is 50 lacs.

 Note

TCS will only be applied when the accumulate amount of all A/R invoices or payments of a specific
business partner in the specific financial year, exceeds the defined cumulative threshold of the
withholding tax code, defined for the specific business partner.

• Interim Accounts: These G/L accounts will be debited/credited at the time of recording TCS on an A/R
invoice or A/P invoice.

3.3 Mapping TCS Codes to Business Partners

1. From the SAP Business One Main Menu, choose the Business Partners Business Partner Master Data
Accounting Tax subtab.
2. Choose the ellipsis button next to the WTax Codes Allowed field.
3. In the WTax Codes Allowed window, select the TCS codes you want to make available for this specific
business partner.

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How to Work with TCS in the India Localization of SAP Business One
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4 Marketing Documents for A/R

If you chose to accumulate the amount for TCS based on invoices for the financial year, the TCS will be applied
when you create an A/R invoice or an A/R down payment invoice, or an A/R down payment request (journal
posting at time of incoming payment against the down payment request) for the relevant business partner and
only when the accumulate amount of all A/R invoices or A/R down payment invoices (against which payment
is received,) or A/R down payment requests (against which payment is received) of this specific business
partner in the specific financial year, exceeds the defined cumulative threshold of the related withholding tax
code.

Procedure

1. Create an A/R invoice.

2. To select TCS codes applicable at the document level, right-click the general area of the invoice and choose
WTax Table. The available TCS codes are based on the TCS codes mapped to the business partner master
data.
3. In the Withholding Tax Table window, you can view and change the default withholding tax codes.

 Note

You cannot select TCS withholding tax and payment category withholding tax at the same time, and
you can only select one TCS withholding tax in one document.

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 4. Add the invoice.

Results

• The withholding tax amount in the invoice will be calculated based on the settings of the selected TCS code
and be displayed in the WTax Amount in the invoice’s header.
• If the cumulative threshold for the specific customer has not been exceeded, the withholding tax amount in
the invoice will be zero.
• If the invoice amount achieves the cumulative threshold, a system message will be displayed specifying
that the withholding tax will be calculated.
• The withholding tax amount is posted to an interim account, set in the TCS Withholding Tax - Setup
window, and when the invoice is paid, the interim account will be cleared, and the withholding tax amount
will be posted to the payable account.
• SAP Business One reconciles the documents postings automatically, including the tax amounts.

In the following scenarios, the invoice amount will be deducted from the accumulative amount of the specific
business partner, as long as the threshold amount was not exceeded:

• when cancelling the A/R invoice

• when copying the A/R invoice to a credit memo
• when adding a stand-alone credit memo

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5 Incoming Payments

If you chose to accumulate the amount for TCS based on payments for the financial year, the TCS will be
applied when you create a payment for the relevant business partner and only when the accumulated amount
of all the payments of this specific business partner in the specific financial year exceeds the defined
cumulative threshold of the related withholding tax code.

Procedure

1. Create an incoming payment.

2. Choose the invoice (A/R Invoice or A/R Down Payment Invoice or A/R Down Payment Request) you wish
to pay and choose the payment means.
3. Add the payment.

Results

• If the payment amount achieves the cumulative threshold for the specific business partner, a system
message will be displayed: “Payment amount has exceeded the TCS cumulative threshold”.

• Manually create an A/R invoice for this TCS amount.

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 •  Note

From now on, when the incoming payments cumulative threshold is already exceeded, the TCS will be
applied when you create an A/R invoice for this business partner based on invoices amount
cumulation, as described in the Marketing Documents for A/R [page 12] section.

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6 Marketing Documents for A/P

When you buy goods or services from your vendor and TCS was collected from you, the TCS amount should be
recorded by you in the A/P invoice.

Procedure

1. Create an A/P invoice.

2. To select TCS codes applicable at the document level, right-click the general area of the invoice and choose
WTax Table. The available TCS codes are based on the TCS codes mapped to the business partner master
data.
3. In the Withholding Tax Table window, you can view and change the default withholding tax codes.

 Note

You cannot select TCS withholding tax and payment category withholding tax at the same time, and
you can only select one TCS withholding tax in one document.

4. Add the invoice.

Results

• SAP Business One does not track any accumulation of TCS amount on the purchase documents.
• It is recommended to choose the relevant TCS code in each A/P invoice and not set a default in the
vendor’s master data.
• TCS is also supported in A/P down payment request (when you pay the request) and in A/P down payment
invoice documents.
• TCS is not supported in stand-alone A/P credit memo.

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