Definition:

In one business transaction, several kinds of withholding tax may have to be withheld. The SAP System
uses withholding tax types to reflect this. Several withholding tax types can be defined in the system;
one or more can be assigned in the vendor master record.

The withholding tax type governs the way in which extended withholding tax is calculated and is defined
at country level. As far as the time of posting for withholding tax amounts is concerned, there are two
different categories of withholding tax types:

Withholding tax type for posting at time of invoice

Withholding tax type for posting at time of payment

These new functions are together known as "Extended Withholding Tax" as distinct from the withholding
tax functions that have previously existed and which will continue to exist alongside Release 4.0.

For each of your company codes, you need to decide whether you implement the previous withholding
tax functionality or Extended Withholding Tax. Note that Extended Withholding Tax is an alternative and
not a complement to the withholding tax functions that have previously existed.

The new functions include the facility to:

Enter more than one kind of withholding tax (withholding tax types) per line item
Enter withholding tax for customer line items
Specify the actual point at which withholding tax is posted (posting the withholding tax
amount at the time or invoice or at the time of payment).
Post withholding tax for partial as well as full payments
Include both earlier transactions (accumulation periods of a year, quarter or month) and cash
discount when calculating the withholding tax
Exercise full control over minimum and maximum amounts
Define calculation regulations in the form of scales
Choose the net, gross or (sales/purchase) tax as the withholding tax base
Determine a number of different rounding rules

In addition to the above, you can also create withholding certificates numbered consecutively and in
ascending order for each payment transaction/withholding tax type in the relevant payment.

For each company code, you need to decide whether you wish continue using the previous withholding
tax functions or whether it would be advisable to change to using Extended Withholding Tax.

Depending on the country in which the company code is defined, it may be necessary to implement
Extended Withholding Tax on legal grounds.

The key concept in Extended Withholding Tax is the distinction between withholding tax type and
withholding tax code. Whilst withholding tax types represent basic calculation rules, certain aspects of
these rules - in particular percentage rates - are defined under withholding tax code. You can define any
number of withholding tax codes for a given withholding tax type.
If a particular transaction attracts more than one kind of withholding tax, this eventuality is handled in the
SAP System by defining more than one withholding tax type. When entering a line item, withholding tax
data can then be entered for each of these withholding tax types.

Extended Withholding Tax allows you to process withholding tax in both Accounts Receivable and
Accounts Payable. In Accounts Payable, the vendor is the person subject to tax, and the company code is
obligated to deduct withholding tax and pay this over to the tax authorities on their (the vendor's) behalf.
In Accounts Receivable, the company code itself is subject to tax, and the customers that do business with
this company code deduct withholding tax and pay this over to the tax authorities on its (the company's)
behalf. The basic principle in both cases is that it is the business partner of the person or entity subject to
tax that deducts the tax. Withholding tax is calculated and posted to the appropriate withholding tax
accounts at different stages, depending on the legal regulations that pertain. As a rule, withholding tax is
posted at the same time that the payment is posted, in other words the outgoing payment (Accounts
Payable) or incoming payment (Accounts Receivable) is reduced by the withholding tax amount.

To calculate pay and report the withholding tax, the SAP system provides two functions

Classic Withholding tax

Extended Withholding tax

Difference between the Classic and Extend withholding tax

1. Classic Withholding tax only for payment. Whereas Extend withholding tax payment and Invoice
2. Classic Withholding tax only for vendors. Whereas Extend withholding tax for vendors and
customers also
3. Classic Withholding tax only one tax component (like TDS). Whereas Extend withholding tax
number of tax component (like TDS + Surcharge + Ecess + H Ecess)

Extended Withholding tax includes all the functions of classic withholding tax; SAP therefore
recommends the use of extended withholding tax. We will cover the Extended withholding tax
functionality

With Extended Withholding tax, we can process withholding tax from both the vendor and customer
view. From the Accounts Payable perspective, the vendor is the person subject to tax and the company
code is obligated to deduct withholding tax and pay to tax authorities.

From the Accounts Receivable perspective the company code itself is subject to tax and the customers
that do business with the company deduct withholding tax and pay to the tax authorities. Generally the
Accounts Payable perspective is used by majority of the implementing companies.

Note: At present scenario SAP recommend to client level use Extend withholding Tax
Menu path IMG Financial Accounting Financial Accounting Global SettingsWithholding
TaxExtended Withholding Tax Basic Settings Check Withholding Tax Countries

Transaction Code SPRO

Step 01 Click

Click on

Define Official Withholding Keys

Menu path SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Basic Settings Define Withholding Tax Keys

Transaction Code
SPRO
Configuration
Description All 2 series Company codes are liable to deduct withholding tax from the
payments of certain types of income. For this purpose Company code from 2005
to 2014 intends using EWT functionality of SAP R/3. This configuration defines
the Sections of Income Tax Act 1961 under which Tax is deducted at Source.

Step 01 Double click on Define withholding tax and select Country key for India Key is IN
Step 02 Click on and create the official keys

Rates for tax deduction at source

Tax is deductible at source at the rates given in table (infra). If PAN of the deductee is not intimated to the deductor,
tax will be deducted at source either at the rate given in the table or at the rate of 20 per cent, whichever is higher.
Further, under section 94A(5), if payment or credit is made or given to a deductee who is located in a notified
jurisdictional area, tax is deductible at the rate given in the table or at the rate of 30 per cent, whichever is higher.
TDS rates for the financial year 2013-14 are as follows

Category A - When recipient is resident

Nature of payment TDS (SC
: Nil, EC
: Nil, SHE
C :Nil)
l Sec. 192 - Payment of salary [normal tax rates are applicable , SC : 10% (if net
income exceeds Rs. 1 crore), EC : 2% and SHEC : 3%]
l Sec. 193 - Interest on securities
a. interest on (a) debentures/securities for money issued by or on behalf of any local 10
authority/statutory corporation, (b) listed debentures of a company [not being
listed securities in demat form], (c) any security of the Central or State
Government [i.e., 8% Savings (taxable) Bonds, 2003, but not any other
 Government security]
b. any other interest on securities (including interest on non-listed debentures) 10
l Sec. 194 - Dividend
a. deemed dividend under section 2(22)(e) 10
b. any other dividend Nil
l Sec. 194A - Interest other than interest on securities 10
l Sec. 194B - Winnings from lottery or crossword puzzle or card game or other game of 30
any sort
l Sec. 194BB - Winnings from horse races 30
l Sec. 194C - Payment or credit to a resident contractor/sub-contractor
a. payment/credit to an individual or a Hindu undivided family 1
b. payment/credit to any person other than an individual or a Hindu undivided family 2
l Sec. 194D - Insurance commission 10
l Sec. 194EE Payment in respect of deposits under National Savings Scheme, 1987 20
l Sec. 194F - Payment on account of repurchase of units of MF or UTI 20
l Sec. 194G - Commission on sale of lottery tickets 10
l Sec. 194H - Commission or brokerage 10
l Sec. 194-I Rent
a. rent of plant and machinery 2
b. rent of land or building or furniture or fitting 10
l Sec. 194-IA - Payment/credit of consideration to a resident transferor for transfer of 1
any immovable property (other than rural agricultural land) (applicable from June 1,
2013)
l Sec. 194J - Professional fees, technical fees, royalty or remuneration to a director 10
l Sec. 194LA - Payment of compensation on acquisition of certain immovable property 10

Category B - When recipient is non-resident or foreign company

Nature of payment If recipient is non- If recipient is non-domestic
resident non- company
corporate person
Payment/ Payment/ Payment/ Payment/c Payment/c
credit credit credit does redit redit
does not exceeds R not exceeds Rs exceeds Rs
exceed Rs. s. exceedRs. . .
1 crore (in 1 crore(in 1 crore(inc 1crore but 10Crore (i
clusive clusive lusive ofSC does no nclusive
of SC ofSC : Nil, EC : exceed Rs. of SC
: Nil, EC : : 10%, 2%, SHEC 10 crore(in : 5%, EC :
2%, SHEC EC : : 1%) clusive 2%, SHEC
: 1%) 2%,SHEC of SC : 1%)
: 1%) : 2%, EC :
2%,SHEC
: 1%)
l Sec. 192 - Payment
of salary [normal tax
rates are applicable ,
SC : 10% (if net
income exceeds Rs.
1 crore), EC : 2%
and SHEC : 3%]
l Sec. 194B - 30.9 33.99 30.9 31.518 32.445
Winnings from lottery
or crossword puzzle or
card game or other
game of any sort
l Sec. 194BB - 30.9 33.99 30.9 31.518 32.445
Winnings from horse
races
l Sec. 194E - Payment 20.6 22.66 20.6 21.012 21.63
to a non-resident
foreign citizen
sportsman/entertainer
or non-resident sports
association
l Sec. 194EE - 20.6 22.66 NA NA NA
Payment in respect of
deposits under
National Saving
Scheme, 1987
l Sec. 194F - Re- 20.6 22.66 NA NA NA
purchase of units of
MF or UTI
l Sec. 194G - 10.3 11.33 10.3 10.506 10.815
Commission on sale of
lottery tickets
l Sec. 194LB - 5.15 5.665 5.15 5.253 5.4075
Payment/credit by
way of interest by
infrastructure debt
fund
l Sec. 194LC - 5.15 5.665 5.15 5.253 5.4075
Payment/credit of
interest by an Indian
specified company on
foreign currency
approved loan/long-
term infrastructure
bonds from outside
India
l Sec. 194LD - Interest 5.15 5.665 5.15 5.253 5.4075
on a rupee
denominated bond of
an Indian company or
Government security
(from June 1, 2013)
l Sec. 195 -
Payment/credit of
other sum to a non-
resident
a. income of foreign 20.6 22.66 NA NA NA
exchange assets
payable to an
Indian citizen
b. income by way of 10.3 11.33 10.3 10.506 10.815
long-term capital
gains referred to
in section 115E
or section
112(1)(c)(iii)
c. short-term capital 15.45 16.995 15.45 15.759 16.2225
 gains under
section 111A
d. any other long- 20.6 22.66 20.6 21.012 21.63
term capital
gains [not being
covered by
section 10(33),
10(36) and
10(38)]
e. income by way of 20.6 22.66 20.6 21.012 21.63
interest payable
by
Government/Indi
an concern on
money borrowed
or debt incurred
by Government
or Indian concern
in foreign
currency (not
being interest
referred to in
section 194LB or
194LC or
194LD)
f. royalty [see Note 5] 25.75 28.325 25.75 26.265 27.0375
g. royalty [not being
royalty of the
nature referred to
in (f) supra]
[seeNote 6]
where the 30.9 33.99 51.5 52.53 54.075
agreement is
made after
March 31, 1961
but before April
1, 1976
where the 25.75 28.325 25.75 26.265 27.0375
agreement is
made on or after
April 1, 1976
h. fees for technical
services
[see Note 7]
where the 30.9 33.99 51.5 52.53 54.075
agreement is
made after
February 29,
1964 but before
April 1, 1976
where the 25.75 28.325 25.75 26.265 27.0375
agreement is
made on or after
April 1, 1976
i. any other income 30.9 33.99 41.20 42.024 43.26
l Sec. 196B - 10.3 11.33 10.3 10.506 10.815
Payment/credit of
income from units
(including long-term
capital gains on
transfer of such units)
to an offshore fund
l Sec. 196C - 10.3 11.33 10.3 10.506 10.815
Payment/credit of
interest of foreign
currency bonds or
GDR (including long-
term capital gains on
transfer of such bonds)
(not being dividend
referred to in section
115-O)
l Sec. 196D - 20.6 22.66 20.6 21.012 21.63
Payment/credit of
income from securities
(not being dividend,
short-term or long-
term capital gain) to
Foreign Institutional
Investors

Note TDS will chages year to year as per government rules and regulation in India
Step 03 Click on

Step 04 Define Reasons for Exemption

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Basic Settings Define Reasons for Exemption

Transaction
Code SPRO

Configuration
In this activity you define reasons for exemption from withholding tax. You can
Description
enter this indicator in the vendor master record or in the company code
withholding tax master record information.
Step 04
Click on save

Step - 05

Check Recipient Types

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Basic Settings Check Recipient Types

Transaction
Code SPRO

Configuration
For Deducting Tax at Source corporate and non-corporate payees are subject to
Description
different set of rules and the rules for making payment of tax deducted are also
separate. SAP provides functionality of recipient types to track various types of
income recipients.

The Recipient type is assigned in the Vendor Master and captured on all the
 Withholding Tax related transactions. The information is used at the time of
Challan processing as Income tax requires us to process separate challans for
Companies and Others

Click on
Click on save

Step 06

Check Income Types

Here we should create type of income for TDS

Click on save

Define Business

Menu path SAP Customizing Implementation Guide Cross-Application

Components General Application Functions Nota fiscal CNPJ
Business Places Define Business Places

Transaction Code SPRO

Configuration Business Place represents the Sales Tax Registration of a Company code.
Description A company has various offices at Head Office, Regional offices etc. Tax
can be deducted at any of these places. Withholding tax tracking is thus
done based on business places. The use of business places is mandatory.
Create a business place for each tax deduction account number (TAN) that
your company has.

Step 07 Click on Define business Place

Click on New
Note: As per client requirement create number of business places

Define section code

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax
Extended Withholding Tax Basic Settings India Define Section
Codes

Transaction Code SPRO

Configuration Section Code represents the Income Tax TAN Registration of a Company
Description code. The TAN of a Section Code is maintained in the Address attributes
against the field 'Search Term 1'

When you post a document with a withholding tax item (for example, a
vendor invoice or a credit memo), enter the section code in order to make
sure that the tax item is assigned to the correct TAN.
Note: When we post the vendor invoice it is mandatory assign Business and Section code. Otherwise TDS challan
will not generate

Step 08 click on define section code

Click on
Note: As per requirement create the number of section code

Assign Factory Calendars to Business Places

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax
Extended Withholding Tax Basic Settings India Assign Factory
Calendars to Business Places

Transaction Code SPRO

Configuration
Description

Step 08- Double click on Assign Factory Calendars to Business Places and click
`

Assign Factory Calendars to Section Codes

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax
Extended Withholding Tax Basic Settings India Assign Factory
Calendars to Business Places

Transaction Code SPRO

Configuration
Description

Step 09 Double on Assign Factory Calendars to Business Places and click

Maintain Tax Due Dates

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Basic Settings India Maintain Tax Due Dates

Transaction
Code SPRO

Configuration Tax Deducted at source is to be paid to tax authorities by 7th day of month
Description following the month in which the tax is deducted. SAP requires maintenance of
due dates. In current situation the due date for all taxes is commonly 7th day of
following month. As such 777 days are designated in standard configuration,
which internally determines the due date

Click on Maintain Tax Due Dates and click on

Note: What is impact of maintain tax due date, and what is the number 777

When you enter a vendor invoice, SAP R/3 automatically determines what date you have to remit the
withholding tax to the tax office and records it in the tax line item. There are several factors that influence the
tax due date, all of which you can customize: Which section of the Income Tax Act the tax is from
(represented in SAP R/3 by the official withholding tax key)

Whether the vendor is classified as a company or not (in the system, the recipient type) In the
event of the tax being due on a public holiday, whether the tax office requires you to remit the tax a day
earlier or a day later. When you enter a vendor invoice, SAP R/3 automatically determines the tax due date
and enters it in the tax line item. When you come to create a remittance challan to remit the withholding tax,
the system uses the tax due date. 777 Means, If you have to remit the tax seven days from the month end,
enter 777.Otherwise, enter the number of days after which you have to remit the tax to the tax office.
Define Withholding Tax Type for Payment Posting

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Calculation Withholding Tax Type Define
Withholding Tax Type for Payment Posting

Transaction
Code SPRO

Configuration As per Indian Tax Laws, Tax at Source has to be deducted at the time of Invoice
Description or Payment whichever is earlier. For This purpose tax types and tax codes need to
be defined for both Posting with Invoice and Posting with Payments
Defining withholding tax types (required)

Screen area Select... Result

Calculation/Base amount Net amount Net base for tax contributions is selected in the
corresponding classic withholding tax code

Gross amount Net base for tax contributions is not selected in

the corresponding classic withholding tax code

Calculation/Rounding W/tax comm. round

rules

Calculation/Cash discount C/disc. pre W/tax

Calculation Post w/tax amount The flag Posting on payment is selected in the
corresponding classic withholding tax code

Accumulation type Per year stating with

month April
XXXX

Control data W/tax base manual

No cert. numbering

Definition
minimum/maximum
amounts W/tax code level
Base amount

Definition
minimum/maximum
amounts W/tax code level
Withholding tax amount
Central Invoice No central. invoice

Minimum check Minimum check at

item level

or Minimum base amount No check on min.

check base amount at doc.
level

Note: TDS always calculated on gross amount, because net amount should without tax amount and it will
post only net value amount. We need to pay tax to department on the behalf of vendor means services
provider to us. TDS will deducted calculated on invoice (gross amount which is including the service tax)

Stet 01 Click on Define Withholding Tax Type for Invoice Posting and assign country key IN

Click on
Withholding Tax Type Name

IC 194C payment Contracts/Sub Contracts INV

E3 194C payment Cont/Sub Contracts ED INV

S2 Tax collected at sources- Surcharges INV

Note: No surcharge and cess is to be added from 01.04.2009 on tax deducted on non-salary payments
made to resident tax payers. It means that Surcharges & cess is not be included in basic TDS rates

IC: 194C payment Contracts/Sub Contracts INV

Create: 194C Adv payment Contr/Sub Contracts INV
Create N3: 194C Adv Contr and Sub.Constract payment
E3: 194C payment Cont/Sub Contracts ED INV
S2: Tax collected at sources- Surcharges INV
Note: Customize Nature of payment TDS same steps as per above as per requirement of client

Define Withholding Tax Type for Payment Posting

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Calculation Withholding Tax Type Define
Withholding Tax Type for Payment Posting

Transaction
Code SPRO

Configuration As per Indian Tax Laws, Tax at Source has to be deducted at the time of Invoice
Description or Payment whichever is earlier. For This purpose tax types and tax codes need to
be defined for both Posting with Invoice and Posting with Payments

Difference between the Invoice posting and payment posting

Withholding Tax Classified WHT and EWHT. Classified withholding is calculated at the time of vendor
payment. Whereas Extended Withholding Tax: This is an enhancement to classical withholding tax and
allows calculating the tax at the time of invoice or payment whichever is earlier. Thats why we will
create a separate withholding tax types for invoice posting and payment posting.

For example: If you take Indian scenario: WHT (TDS) has to be deducted at the time of Invoice or
Payment whichever is earlier. So lets say we are making down payment to vendor, we have to deduct the
WHT at the time of payment itself. We will not deduct for that particular invoice as we have already
deducted for related down payment. So we customized both invoice posting and payment posting.

Step 11 click on Define Withholding Tax Type for Payment Posting and assign country key IN and
click on

Withholding Tax Type Name

PC 194C Contracts and Sub-contract payment

EC 194C Contr and Sub.Const payment Edcess

SS Tax collected at sources- Surcharges payment

PC: 194C Contracts and Sub-contract payment

Click on Save

EC: 194C Contr and Sub.Const payment Edcess

Step 12 click Define Withholding Tax Type for Payment Posting and click
Click on Save

Step 13 Define Withholding Tax Type for Payment Posting and click

SS: Tax deducted at sources- Surcharges payment

Define Withholding Tax Codes

Menu path SAP Customizing Implementation Guide Financial Accounting (New) Financial Accounting
Global Settings (New) Withholding Tax Extended Withholding Tax Calculation
Withholding Tax Code Define Withholding Tax Codes

Transaction Code
SPRO
Configuration
As per Indian Tax Laws, Tax at Source is to be deducted for different sections
Description
and for different types of payees (Recipients) at different rates.

Tax Codes control the rates of deduction, and whether it is applied with Invoice
or Payment and how the base amount is treated etc. These codes will need to be
defaulted in the Vendor Master records of Vendors liable to TDS .Further details
of exemption, reduced rate for deduction etc. and the recipient types are required
to be captured. We have defined following tax codes for TDS.

The withholding tax code defines the following:

 Calculation of the Tax Base
You specify whether the invoice amount, including the tax on sales/purchases, is
to be used as the tax base amount.

Taxable Amount
You specify the percentage of the tax base to be used to calculate withholding
tax.

Rate of Taxation
You specify the percentage of the taxable amount to be paid or reported to the tax
office.

Reduced Rate
A reduced tax rate can be entered in place of the alternative tax rate. Given a
valid exemption certificate, the system calculates the withholding tax amount
using this rate.

Posting Withholding Tax

You determine whether the amount is to be paid to the authorities (in which case
it must be posted to a separate account) or only reported.

The above information is country-specific. These codes are used for the
following purposes:

To determine the tax amount automatically

To determine automatically the tax accounts to which the tax amount is to be

posted

To assign a certain tax rate to a line item

Defining withholding tax codes (required)

Screen area Field Must contain...

General data Off. w/tax The value of the Withholding tax code field from the
key corresponding classic withholding tax code.

Base amount Percentage The value of the same field from the corresponding
subject to tax classic withholding tax code.

Posting Post. indic. The value 1

Calculation With/tax rate The value of the same field from the corresponding
classic withholding tax code.

W. tax. form. Select this field if the same field is selected in the
corresponding classic withholding tax code.

Reporting information Region The value of the same field from the corresponding
classic withholding tax code.

Prov. tax code The value of the same field from the corresponding
classic withholding tax code.

Income type The value of the same field from the corresponding
classic withholding tax code.

Step 14 Click on Define Withholding Tax Codes and Assign country key IN. Click on

Withholding tax type withholding code Name

ID D2 194C 2.266% Contractors Inv. COMP

Again create Withholding Tax payment

Withholding tax type withholding code Name

IC 01 194C 2.266% Contractors paymentCOMP

Create 192C 2.26% TDS on Adv contractors-Company

Withholding tax type withholding code Name

PC A1 194C 2.266% TDS Adv. Contractors payment-Inv

Define Exchange Rate Type for Withholding Tax Type

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Calculation Withholding Tax Code Define Exchange
Rate Type for Withholding Tax Type

Transaction
Code SPRO

Configuration When calculating withholding tax for payments, the exchange rate of the
Description payment is usually used, if the withholding tax amount has to be translated from
a foreign currency into the local currency. Some countries have legal
requirements that specify which exchange rate is to be used. In Japan, for
example, the bank selling rate (and not the average rate, for example) must be
used for translating withholding tax.

Step 15 Click on Define Exchange Rate Type for Withholding Tax Type and Assign Country key IN
Define Rounding Rule for Withholding Tax Type

Menu path SAP Customizing Implementation Guide Financial Accounting (New)

Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Calculation Withholding Tax Type Define Rounding
Rule for Withholding Tax Type

Transaction
Code SPRO

Configuration As per Indian Tax Laws, Tax at Source has to be rounded up to next higher
Description rupee. In conjunction to rounding up in tax types the units to which the tax is to
be rounded off is set at 100 i.e. 100 paisa or 1 Rupee

Step 16 Click on Define Rounding Rule for Withholding Tax Type and click on
Similarly you can assign ED and surcharges round unit 100

Maintain Surcharge Calculation Methods

Menu path SAP Customizing Implementation Guide Financial Accounting (New)
Financial Accounting Global Settings (New) Withholding Tax Extended
Withholding Tax Calculation India Surcharges Maintain Surcharge
Rates (Surcharges Combined with Basic WH Tax Codes)

Transaction
Code SPRO

Configuration In this IMG activity, you specify which method you want to use to handle
Description surcharge taxes, according to whether you wish your business to show basic
withholding tax and surcharges separately, or whether they can be combined. The
system offers you two choices:

You can define tax codes that contain both the basic tax and the
surcharge tax.

You can define separate tax codes for basic tax and surcharge tax
 respectively.

At ABC, we have chosen the option of defining combined Tax codes. A single
tax code is defined having the Basic Rate and Surcharge and/or ECess/HECess
and breakup will be maintained in the following steps.

Step 17cick on Maintain Surcharge Rates (Surcharges Combined with Basic WH Tax Codes) and Click

on

Maintain ECess and HECess Rates

Menu path

Transaction SM30
Code
Table J_1IEWT_ECESS1

Configuration Since, we have chosen to maintain a single tax code with a composite Tax rate
Description for Basic TDS + Surcharge + ECess/HECess, we need to inform the system about
the tax codes where the Tax rates is inclusive of ECess and HECess and the
amount of Cess included therein.This information is used by the system for
splitting the TDS amount for the purpose of TDS certificates and TDS Annual
returns.

Table - J_1IEWT_ECESS1

Assign Withholding Tax Types to Company Codes

Menu SAP Customizing Implementation Guide Financial Accounting (New) Financial Accounting
path Global Settings (New) Withholding Tax Extended Withholding Tax Company Code
Assign Withholding Tax Types to Company Codes

Transaction
Code SPRO

Configurati
All withholding Tax Types that are to be used in a Company Code need to be assigned to the
on
Company Code.
Description

Step 18 Click on Assign Withholding Tax Types to Company Codes and click on
Click on Save
Click on save
Click on save

Activate Extended Withholding Tax

Menu path SAP Customizing Implementation Guide Financial Accounting (New) Financial
Accounting Global Settings (New) Withholding Tax Extended Withholding Tax
Company Code Activate Extended Withholding Tax

Transaction Code
SPRO
Configuration
Description For a Company Code to be able to use the EWT functionality the same needs to be
activated in that Company Code.
Click Yes and save