Withholding Tax (TDS/TCS) End to End Process (Configuration, Transaction, Settlement, Authority Payment with Challan details and Report) in Microsoft Dynamics 365 Finance and Operations: Part-1

Hello and welcome to the next blog. In this blog I will be writing about complete end to end process cycle of withholding tax in D365.

Most of us, post transactions in D365 but payments and settlements perform outside system which ends up in posting manual rentiers for TDS payable and Payments.

No worries, after this post, you will suggest the complete withholding process within system to customer.

Pre-requisite: Enable TDS calculation in General ledger parameters > Sale Tax

So, lets do with the use case.

Scenario: Here are the three steps for end to end process:

1. All TDS payable transactions in system with following expected entry:

Vendor Debit to TDS Payable Credit

2. Once process withholding payments process/settlements:

Vendor (Withholding authority) Credit to TDS Payable Debit

3. Payment Process with challan details:

Vendor (Withholding authority) Debut to Bank Credit

1. Configuration

Step-1: Create Withholding authority

Navigate, Tax > Indirect Tax > Withholding tax > Withholding tax authority

Step-2: Create Withholding settlement period

Navigate, Tax > Indirect Tax > Withholding tax > Withholding settlement period

Step-3: Create Withholding component group and component code (TDS/TCS)

In this setup, we can specify the section codes e.g. 194 C, 194 J in Indian taxation, perform same steps for both TDS and TCS

Navigate, Tax > Setup > Withholding Tax > Withholding Tax component group/code

Step-4: Create Withholding tax code and “Rate”

Navigate, Tax > Indirect Tax > Withholding tax > Withholding tax code

Step-5: Create Withholding tax group and Map to designer

Navigate, Tax > Indirect Tax > Withholding tax > Withholding tax group

Step-6: Map TAN number for all the addresses which will be used in Transaction posting

This must be done in legal entity addresses and site/warehouse address > Tax information

Step-7: Enable Vendor/Customer master for withholding Tax calculation

Navigate, All vendor/Customer > Edit > Invoice tab

Note: This is mandatory step

2. Transactions

Step-1: Create Invoice for TDS, Validate TDS amount, Post

Vendor Debit to TDS Payable Credit

Step-2: View withholding tax transactions

Navigate, Tax > Inquiries and Reports > Withholding Tax transactions

3. Withholding tax Payment and Settlement

Step-1: Process Withholding tax payment process

This step is to process in month end based on settlement frequency defined in setup, this must be run for each TAN number

Navigate, Tax > Withholding tax > Declaration > Withholding Tax Payment

Step-2: View Open transactions in Tax Authority Vendor

Navigate, Vendor > Open > Transactions

TDS Payable Debit to Vendor Credit

Step-3: Payment of Settlements, Create and post Payment journal

Vendor (Tax Authority) Debit to Bank Credit

Step-4: Enter Challan Details

4. View of final withholding tax payments and settled transactions

Navigate to, Tax > Indirect Tax > Withholding Settlement Period

That is it for this blog, hope this will help you in better process design for customer next time.

Thank you for reading keep sharing in your network. I will be back with next part with some more scenarios.