TDS is one of the modes of collection of Income Tax. You have to deduct TDS at the time of crediting to the party’s account or at the time of payment, whichever is earlier even though you have to deduct TDS for payment of advance to the party.
Income tax rules requires that TDS to be deducted from the party’s bill at the time of credit to the party or payment, whichever is earlier and deposited to the government accordingly (Income Tax Authority). The payer later on issues a certificate to the payee. (i.e. Deductee), in respect of deduction of TDS and deposit to the government.
The buyers (Corporate and Non- Corporate) make payments (such as Salary, Rent, Interest on securities, Dividends, Insurance Commission, Professional Fees, Commission on Brokerage, Commission on Lottery tickets. etc) to the sellers(Services) and deduct the requisite amount from such payments towards tax.
TDS PROCESS
- Deductee (Seller) provides Services and Bill to the Deductor (Buyer)
- Deductor makes the payment after deducting TDS.
- Deductor remits the TDS amount into Bank (treasury)
- Bank Treasury remit the amount to the Government Account
- Deductor issues Form 16A to Deductee for the TDS amount deducted
- Deductor files tds e-TDS to NSDL. (National securities deposit limited)
- NSDL uploads the e-TDS information to Income Tax Department
- Deductee Files the Return with Form 16A to income Tax Department
ASSIGNMENT ON TDS
Audit fees payable to Nagesh Assosiates (Individual / HUF / Resident) – ₹ 3,00,000. Deduct TDS from his amount and pass the necessary entries. Ref no: Nag/01.
TDS Nature of payment: Professional Fees
Section 1974J
Threshold limit : ₹30,000
SOLUTION
SETTING UP FEATURES
- Press F11 for company features
- Taxation:
Enable Tax deduction at source : Yes
Press enter
Company TDS Deductor Details
TAN registration number : Enter the TAN number
Deductor Type : Company
Deductor Branch / Division : Rajam
Set / Alter details of person responsible : yes
Enter the person responsbile details
press enter - Press CTRL + A to accept the total screen
CREATING TDS NATURE OF PAYMENT
- Gateway of Tally
- Accounting Masters
- Statutory Masters
- TDS Nature of Payments
- Statutory Masters
- Accounting Masters
- Name : Professional Fees
- Section : 1974J
- Rate of Individual / HUF / Resident :
With Pan : 10% - Threshold limit : 30,000
Press enter
Accept _ Yes
CREATING LEDGERS
- Gateway of Tally
- Accounting Masters
- Ledger
- Ledger
- Accounting Masters
- Name : Audit Fees
Under : Indirect Expenses
Is TDS applicable : Applicable
Press enter
Nature of Payment : Professional Fees
Press enter
Accept _ Yes - Name : Nagesh Assosiates
Under : Sundry Creditors
Maintain Balances Bill By Bill : Yes
Is TDS Deductable : Yes
Deductee Type : Individual / HUF / Resident
Deduct TDS in Same voucher : Yes
<Press Enter>
Select “Professional Fees” from nature of payments list
press enter
select “End of list”
press enter
enter the mailing details
Note : entering the PAN Number compulsory.
Accept_Yes - Name : TDS on Audit Fees
Under : Duties & Taxes
Type of Duty / Tax : TDS
Nature of Payment : Professional Fees
Press enter
Accept _ Yes
CREATING VOUCHER with TDS details
- Gateway of Tally
- Vouchers
- Press F7 for Journal
- Vouchers
- Dr : Audit Fees A/c – 3,00,000
Press enter
Cr : Nagesh Assosiates A/c – <press enter > 2,40,000 (Automatically deducts the amount) <press enter>
Type of Ref : New Ref
Name : nag / 01 – Amount : 2,40,000
Cr : TDS on audit fees A/c : 60,000
Press enter
Accept _ Yes - Explanation:
- Audit fees has been debited because of expenses, to increase the expenses it should be debited.
- Nagesh assosiates has been credited because it is liability. To increase the liability, it should be credited.
- TDS on Audit fees has been credited because it is tax liability.

REPORTS (TDS Outstandings)
- Press ALT + G for Go To
- TDS Outstandings
- Total pending ₹60,000
DEPOSITING TDS AMOUNT
- Gateway of Tally
- Vouchers
- Press F5 for payment
- Press CTRL + F for auto fill
- AUTO FILL:
Type of Transaction : stat Payment
Tax Type : TDS
Period from : enter the period
Deducted Till Date : Enter the Date
Section : All Items
Nature of Payment : Professional Fees
Deductee Status : Non – Company
Residential Stauts : Resident
Cash / Bank : SBI
press enter - Now automatically loads the Particulars
press enter
accept_yes



PAYMENT TO THE PARTY
- Press F5 for payment
- Account : SBI
- Particulars : Nagesh Assosiates
- Amount : 2,40,000
- Press enter
- Accept _ Yes