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Dynamics 365 Community / Forums / Small and medium business | Business Central, N... / TDS Calculation
Small and medium business | Business Central, N...
Suggested Answer

TDS Calculation

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Posted on by Dharmesh 379

Dear Experts,

We are facing an issue related to TDS adjustment while applying an advance payment against a Purchase Invoice in D365 Business Central.

Scenario:

  • Advance Payment Posted: ₹100,000
  • TDS Deducted on Advance Payment: ₹1,000
  • Purchase Invoice Created with 5 lines
  • Total TDS on Purchase Invoice: ₹2,000
  • Advance Payment applied in the Purchase Invoice using Applies-to Doc. Type and Applies-to Doc. No. before posting.

Expected Result:
Since TDS of ₹1,000 has already been deducted on the advance payment, the system should post only the remaining TDS amount of ₹1,000 against the Purchase Invoice.

Actual Result:
The system creates both positive and negative TDS entries during invoice posting. While the adjustment appears to be correct for the first 4 lines, the 5th line contains a negative TDS adjustment amount. Due to this, it is difficult to reconcile and identify the actual TDS amount applicable against the invoice line-wise. Total TDS amount show Rs.700 instead of Rs.1000.

We would like to understand:

  1. Why is the negative TDS entry being generated on the last invoice line?
  2. Is this standard system behavior or a product issue?
  3. How is the TDS adjustment calculation performed when advance payments are applied?
  4. Is there any setup, patch, or recommended process to avoid such entries in future transactions?
  5. How should the net TDS amount be verified and reconciled against the Purchase Invoice?

Kindly review the issue and provide your analysis along with the recommended resolution.

Thank you.

 

Categories:
Dynamics 365 Business Central
I have the same question (0)
  • Suggested answer
    Assisted by AI
    OussamaSabbouh Profile Picture
    OussamaSabbouh 18,805 Super User 2026 Season 2 on at
    Hello,
    Based on Microsoft’s India localization documentation, when an advance payment with TDS already deducted is applied to a Purchase Invoice before posting, Business Central should calculate TDS only on the remaining invoice amount; therefore, in your example, the expected net additional TDS is ₹1,000. Positive and negative TDS entries can be part of the adjustment mechanism used to offset TDS already deducted on the advance, but a final net result of ₹700 instead of ₹1,000 is not explained as expected standard behavior in Microsoft documentation. I would therefore first verify that all five invoice lines use the same TDS Section, TDS %, TAN, Location Code, and TDS setup, and that the advance was correctly applied before posting; also check the posted TDS Entries rather than only the line-level distribution. If the setup is consistent and the net TDS is still ₹700, I would treat it as a potential localization calculation issue and raise a Microsoft support case with the exact BC version, India localization version, document setup, and reproducible steps.
    Regards,
    Oussama Sabbouh
  • Dharmesh Profile Picture
    Dharmesh 379 on at

    Thank you @OussamaSabbouh 

  • Suggested answer
    YUN ZHU Profile Picture
    YUN ZHU 102,765 Super User 2026 Season 2 on at

    If you would like a more accurate response, you can post your question to BC Viva Engage; Microsoft technical experts will see it and offer better advice.

    Viva Engage - BC Partners | Localizations

     

    Thanks

    ZHU

  • Suggested answer
    Grigorios Mavrogeorgis Profile Picture
    Grigorios Mavrogeorgis 3,096 Super User 2026 Season 2 on at

    Hi, on point 2 first. The plus/minus pair is how the India localization works, it doesn't post net directly, it calculates TDS on the full invoice and then puts a negative adjustment for what was already deducted on the advance. The balance lands on the last line because the applied advance gets consumed line by line, so line 5 takes whatever is left and it can turn negative. Ugly, but by itself not a bug.

    The 700 instead of 1000 is the real problem. I'd check the TDS Section and Assessee Code on the advance payment against every invoice line, if one line sits on a different section the adjustment won't tie. Also rounding precision in the Tax Type setup, and whether surcharge or threshold overlook is set different between the payment and the invoice.

    For reconciling don't go line-wise, sum the TDS Entries for that document, that is what goes to the return anyway. 

     

    Glad to help - follow up if anything is unclear.   

    ►  If this solved it, marking it verified helps others too.       

    Regards,
    Grigorios Mavrogeorgis
    Business Central Consultant & AL Developer

    Work: Gmsoft Limited
    Blog:  insidebusinesscentral
    LinkedIn: linkedin.com/in/gregorymavrogeorgis

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