Tax Deduction At Source | (TDS) | Tax withheld at source | Tax Withholdings

[jhataka at yahoo.co.uk]

First, Excellent Job and Thank for making accounting for an account novice
like me so much more easier. It works perfect for my small business. ||

Unfortunately, Not many are using GnuCash in India. But I hope more GnuCash
users would soon be there. I tried looking for the solution for my problem.
And I found my problem is some what similar to the problem posted by the
Thai chap, with very little variation. Here it goes.

1. In India there is something called Tax Deduction at/on Source or TDS.
What it means is that when a customer pays an Invoice he does not pay full
amount but deducts 10% and pays the 10% to the Government on my behalf. This
10% is later adjusted when I pay Income Tax to the Government. 

2. Further, like many other countries I am also liable for adding taxes to
my invoices and pay them to the Government. Service Tax (call it Tax1),
Education Cess (call it Tax2), Higher Education Cess (Call it tax3) etc. Let
me explain that with an Example.

(a) Say, I have services or product sold of 1000
(b) Then I am suppose to charge customer 12 % Tax1 that is = 120
(c) Then, I am also suppose to charge 0.24% Tax2 = 2.4
(d) Then, I must add 0.12% Tax3 =  1.2

Total Invoice I raise is of 1123.6

(consider all the above in INR or any currency so far as the concept is the
same) 

I have appropriately created the tax table to post the above taxes in the
liability:Service Tax, liability:Edu Cess, liability:HighEdu Cess accounts.
So thats not the problem. 
  
However, when my customer pays the above invoice. He does not pay 1123.6
instead he deducts 10% that is 112.36 is deducted and 1011.24 is paid. I get
a certificate from the customer that 112.36 is paid to the Government. So
far so Good. I have added an account in the Assets:TDS to reflect the tax
deducted at the source. 

When I process the payment of the above invoice accounts are updated as
follows 
liability:Service Tax, = 120
liability:Edu Cess,     = 2.4 
liability:HighEdu Cess = 1.2

Which is correct so far. 

In the ideal situation if the Government tax witholding was not there then
Remaining 1000 goes to my income account (say Income:Invoice) and
corresponding Bank Account. However, we dont live in an ideal world, so the
government wants my customer to withhold 10% of total invoice amount and so
does he. 

Out of total of 1123.6 I get paid ==> 1123.6 - 112.36 (10% of gross invoice
TDS) = 1011.24

I am able to settle the  Service tax (tax1), Education cess (Tax2) and
higher education cess (tax3). I am however not able to settle the TDS part.
I am not able to include the TDS into the Tax Table because 

1. Customer is not being taxed rather, I am being taxed and customer is
withholding the tax. 
2. The 10% of TDS is computed on the gross invoice amount that is after
adding all sort of taxes.
3. It is not needed to be displayed in the invoice because not all customers
are liable (eligible, or required) to deduct TDS.

Ideally I would like that when ever I process payment appropriate amount
goes into appropriate account. The tax table addresses so far as Tax1, Tax2
and Tax3 are concerned. But when it comes to TDS it fails. So I am left with
making manual entries when I process payment of an Invoice, at least twice I
must process part payments of the invoice first 10% of gross which is posted
from A/R to Assets:TDS then second part remaining from A/R to Asset:bank (or
whatever account).

Similarly, It could be desirable that the income account could also be split
in two income:TDS and Income:invoiceMinusTDS. 

Any clues how can I do it automatically. So that once A payment is processed
and posted in A/R whenever TDS is selected appropriated amount is
transferred to Asset:TDS.

Please help.

I have few other questions relating to taking credit of service tax from the
expenses. At this time I would leave the questions. And I would like to play
with the GNUCash and read more of the posts before I actually pen down those
doubts. 

Look forward to hear from someone.



  





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