How do I record a transaction in Zoho Books where I received the full invoice amount without TDS deduction, refunded the TDS portion to the customer, and the customer will pay the TDS to the government?

You can either create a credit note or an expense to record the TDS amount refunded to the customer. To create a credit note:

Go to Sales on the left sidebar and select Credit Notes.
Click + New in the top right corner.
In the New Credit Note page, add the TDS amount as a line item, associate it with the TDS Receivable account, and select Out of Scope as the Tax.
Click Save as Open.

The credit note will be recorded. You can now record a refund for this credit note.

Similarly, you can also record an expense by associating the refunded amount with the TDS Receivable account.

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