Income TDS

The Government of India introduced TDS (Tax Deducted at Source) to collect taxes directly from the source of income, ensuring a steady flow of revenue. The tax amount is deducted by the customer at the time of payment for a transaction and then deposited with the government.

TDS

Tax Deducted at Source (TDS) is the tax collected by the government at the source of income. The tax is deducted from the taxable amount when making payments to vendors at the time of sale. TDS can be applied to various sources of income, such as rent, salary, etc.

When Should TDS be Deducted?

The Income Tax Department sets the rates for TDS deductions. In a transaction, the person or organisation receiving the payment is called the Deductee, while the person or organisation deducting TDS from the payment made is called the Deductor. TDS is deducted before making the payment, and the tax amount is then deposited with the government. TDS is deducted for all kinds of payments (cash, cheque, or credit), and it is linked to the PAN of both parties.

Apply TDS to Transactions

You can apply TDS to the transactions you create in two ways:

• At Transaction Level
• At Line Item Level

By default, you can apply TDS to your transactions at the transaction level. You can also configure the preferences to apply TDS to your transactions. Here’s how:

• Go to Settings on the left sidebar.
  (OR)
  Click Settings in the top right corner of the page.
• Click Direct Taxes under Taxes & Compliance.
• Select the TDS preferences and click Save.

Apply TDS at Transaction Level

Here’s how you can apply TDS at transaction level:

• Go to the transaction in which you want to apply TDS.
• Select the option TDS in the Total section below the Item Table.
• Select the applicable tax from the dropdown. It will be applied to the Sub Total of your transaction.
• If you want to use a new TDS rate that is not listed in the dropdown, select Manage TDS from the dropdown, create a new TDS tax rate, and apply it to the transaction.
• Click Save.

The TDS tax has been applied at the transaction level.

TDS Override

Overriding TDS may be necessary when vendor specific declarations are applied, special tax rates are granted, the default rate does not align with the nature of the expense, or when corrections are needed due to threshold rules, rounding differences, or compliance updates.

This option ensures that your tax calculations remain flexible, accurate, and compliant with both statutory requirements and organizational policies.

Once you add a TDS rate to your transaction, you will also be able to update the TDS amount deducted from the taxable amount of your transaction. To override TDS in a transaction:

• Go to the transaction in which you want to override the TDS.
• Select the option TDS in the Total section below the Item Table.
• Select the TDS from the dropdown. The TDS selected will be applied to the Sub Total of your transaction.
• Click the Edit icon near the TDS amount deducted from your transaction.
• Enter the amount to be deducted in the pop-up.
• Click Update. The TDS amount to be deducted from the transaction will be updated accordingly.
• Click Save.

TDS Surcharge

TDS surcharge is an extra charge added to the TDS amount for payments made to high-income individuals or entities. It is calculated on the TDS amount to ensure those with higher earnings pay more in taxes. To create a TDS surcharge for the transactions:

• Go to the transaction for which you want to create a TDS surcharge.
• Check the option TDS in the Total section below the Item Table.
• Click Manage TDS from the dropdown.
• In the pop-up that appears, click + New TDS Tax in the top right corner, and select + New TDS Surcharge from the dropdown.
• Enter the Tax Name and the Rate for the TDS surcharge.
• Click Edit to select the Tax Payable Account to track the TDS surcharge for the transaction.
• Click Save.

Now, you can either apply the TDS surcharge to your transaction directly or along with another TDS tax as a TDS group by clicking + New TDS Group in the top right corner of the Manage TDS pop-up.

TDS Cess

TDS Cess is the additional tax that is levied on the TDS that is deducted from a transaction. It is levied on various purposes like education, health, infrastructure, etc. To create a TDS Cess for the transactions:

• Go to the transaction in which you want to create a TDS cess.
• Check the option TDS in the Total section below the Item Table.
• Click Manage TDS from the dropdown.
• In the pop-up that appears, click + New TDS Tax in the top right corner, and select + New TDS Cess from the dropdown.
• Enter the Tax Name and the Rate for the TDS cess.
• Click Edit to select the Tax Payable Account to track the TDS cess for the transaction.
• Click Save.

Apply TDS at Line Item Level

Zoho Spend allows you to apply TDS to the transactions at line item level by configuring the Tax Preferences.

To apply TDS at line item level for the transactions you record:

• Select the transaction for which you want to apply TDS at line item level.
• Click + New in the top right corner of the page.
• Enter the required details.
• In the Item Table, select the TDS for the line item in the TDS column.
• Click Save and Send or Save as Draft.

The TDS tax has been applied at the line item level. You can also apply TDS cess and TDS surcharge to the TDS amount deducted from the transaction.

Apply TDS to Vendor Advances

Zoho Spend allows you to apply TDS to the advance you pay your vendor, so you can deduct the required TDS amount from the advance payment and pay the remaining balance to your vendor. Here’s how:

• Go to Payments Made under Payables.
• Click + New in the top right corner.
• Click the Vendor Advance tab.
• Fill in the required details.
• Select a tax in TDS field.
• You can also update the TDS amount by clicking the Edit icon next to the TDS Amount field if required.
• Click Save.