TDS Entry in Tally with GST – 7 Easy Examples – PDF Download

TDS in Tally - 7 Easy Examples - PDF Download

TDS entry in Tally is something a lot of people have to do everyday. What I am saying is many people pass TDS accounting entries in Tally on a day to day basis.

The reason for this is simple. TDS is applicable on many types of transactions.

Now, with the applicability of GST and the introduction of TDS in GST, there are going to be questions about TDS entry in Tally under GST.

We are going to discuss all of it in this post along with 7 different examples.

To understand all the examples and everything about TDS entries in Tally, you have to be just be with me.

What you will learn in this post

  • What is TDS Tax
  • How to pass TDS Entries in Tally simply without GST
  • How to pass TDS Receivable Entry in Tally
  • How to pass TDS Payable Entry in Tally
  • How to pass TDS Entries in Tally with GST

We are going to discuss all of the above with the help of different examples so that your concepts about TDS in Tally – with and without GST, both of them become crystal clear.

Let us go ahead and start.

Introduction to TDS in Tally

TDS Entry in Tally is a simple accounting entries in Tally.

In fact, once you know the accounting concept behind the TDS entries in general, you can easily pass TDS accounting entries in Tally.

TDS has been there in India since the year 1961. Indian Income Tax Act was first introduced in the year 1961.

Till today, there are many types of transactions on which TDS has been introduced. The most recent one is the introduction of TDS under GST.

It looks confusing to pass TDS entry in Tally with GST but it is actually very easy once you understand the basic accounting concept behind it and divide the TDS entry step by step.

To understand the TDS entry in Tally, you need to first understand what is TDS.

What is TDS Tax

Many people think that TDS is a different kind of tax and therefore they refer to this as TDS Tax.
So, deliberately, I have kept the heading of this topic as TDS Tax.

But let me tell you what the hell TDS is.

The full form of TDS is Tax Deducted as Source and that means whenever someone makes a payment to some other person, tax is deducted at source.

Example 1 – Basic TDS Explanation and TDS Credit

For example, you are making a payment of ₹1,00,000 to me and the TDS is 10%. You will deduct ₹10,000 at 10% and give me ₹90,000.

And, then you will deposit this ₹10,000 to the government in the form of tax.

This is how the entire TDS transaction works. Of course, this is a very simple example but it is necessary to understand TDS for the first time.

Now, let us assume that someone else deducted TDS of ₹4,000 while making a payment of ₹40,000 to you.

Now, firstly, you have deducted ₹10,000 in the form of TDS which is your liability and you have to pay that to the government.

But, when you received another payment, someone else deducted TDS from your income of ₹4,000 also, which that person will deposit to the government.

So, indirectly, you have already paid ₹4,000 as tax in the form of TDS to the government.

Now, if we net off both the transactions then you have to pay the net amount to the government which will be ₹6,000 i.e. ₹10,000 – ₹4,000.

This ₹4,000 which someone else deducted from your income is called TDS Credit. ₹10,000 which you deducted while making payment to someone is called your TDS liability.

Your TDS liability is someone else’s TDS Credit and someone else’s TDS liability is your TDS Credit.

This is how the TDS system works in India. It is also called Net Taxation System.
The net is what we have to pay here which is ₹6,000.

TDS is nothing but tax paid in advance.

At the end of the year, if you are not liable to pay any tax, then the entire TDS is either refunded or you can adjust it against future tax liability.

So, what are the different types of TDS?

It depends on the type of the tax you are talking about. For Income Tax, TDS will be income tax. For GST, TDS will be GST.

TDS is not a different tax as people say it like TDS tax. It is just tax paid in advance and is deducted by the person on behalf of the government, who is making payment.

There is no entirely different TDS tax. TDS is simply what is deducted.

For example, if we say, TDS on payment involving GST – then TDS will be in the form of GST.
If we say, TDS will be deducted on your income or salary – then TDS will be in the form of Income Tax.

Applicability of TDS under GST

If you already know the TDS provisions under GST, you can skip this part and directly move onto TDS Entries in Tally.

TDS under GST has been recently made applicable by the Government of India along with TCS in GST for E-commerce companies.

According to the provisions of the GST law, in a simple language, currently, TDS provisions are only applicable to Government and Government Companies or Undertakings.

You can read the whole notification here.

In other words, the liability to deduct TDS is currently only on the government because it is applicable to only government companies or the government.

But, this provision can also be made applicable to everybody else. So, keep reading this post because it can be made applicable on you too.

Roughly, TDS provisions under GST are only applicable if the following conditions are specified.

  • Payer is a government or a government entity.
  • Payment for the supply of taxable goods or services under GST is more than or equal to ₹2,50,000 under a single contract.
  • Rate of TDS will be 2% i.e. 1% CGST and 1% SGST.

This provision is not applicable when location and place of supply of a supplier is different from place of registration of the recipient. In short, this provision is not applicable on inter-state transactions.

It is also not applicable when the value of a single contract is less than ₹2,50,000.

So, that was the applicability part. I have added it here because it is useful information which we are going to use in this post later.

Now, let us move on to the actual TDS entry in Tally.

TDS Entry in Tally ERP 9 – With Examples

TDS in Tally is divided into 4 simple accounting entries.

  1. First entry is when your TDS gets deducted while receiving the payment.
  2. Second is when you are either eligible for a TDS refund or not.
  3. Third entry is when you deduct the TDS of someone while making the payment.
  4. Fourth and lastly, if you are liable to pay the TDS or not.

Point no. 1 & 2 are connected as well as point no. 3 & 4 are connected which you will automatically understand once you go through the TDS accounting entries in Tally with the examples.

So, let’s start with the 1st point.

Your TDS got deducted while receiving the Payment

This is the most common kind of TDS accounting entry in Tally that is used by most of the people.

Let me explain it you with a very simple example which you can apply anytime someone deducts your TDS.

Example 2 – TDS deduction while receiving the payment

Let’s say, you are eligible to receive a salary of ₹5,00,000 and your employer deducted the TDS and the TDS deduction rate is 10%.

So, the TDS deducted is ₹50,000 i.e. ₹5,00,000 x 10%. So, in total, you got ₹4,50,000 in your bank account after the deduction of TDS.

Now, how will you do this TDS deduction entry in Tally? Well, that’s what I am here for. 🙂

TDS deduction Entry in Tally while receiving the payment

Before you pass the above TDS entry in Tally, you need to create 3 different ledgers.

  1. Salary Ledger under Direct Incomes as you are receiving the salary.
  2. Bank Ledger under Bank Accounts as salary is generally credited in your bank account.
  3. TDS Ledger under Capital Account since your TDS is deducted from your salary and that means it is a reduction in your capital.

You can follow step by step method to create ledgers in Tally here. After you have created all the above ledgers, please follow the steps below.

Now, let us quickly pass the TDS deduction entry in Tally for salary of ₹5,00,000 with TDS of ₹50,000 from the above example .

Here are the steps:

  • From Gateway of Tally, go to Accounting Vouchers.
  • Then you can either enter Journal voucher in Tally or Receipt voucher in Tally. The effect will be the same. I will be entering a Receipt Voucher since we are receiving a salary.
  • To go to the Receipt Voucher, press F6 or select Receipt Voucher from the right hand side green bar.
  • Now, do the accounting entry for TDS and the salary in the bank account. It will be as shown below.

Bank Account Dr ₹4,50,000
TDS Account Dr ₹50,000
To Salary Account ₹5,00,000

It will look a bit different in Tally because Tally takes credit side first when you enter a receipt voucher in Tally. Have a look at the picture below to see how it works in Tally.

TDS Deduction Entry in Tally while receiving payment
TDS Deduction Entry in Tally while receiving payment

This was the first TDS entry in Tally in which you are receiving salary and your employer has deducted TDS and you receive the remaining salary.

This method can be applied to any kind of payment that you receive after your TDS has been deducted.

Now, let us move ahead to the next point.

TDS Receivable Entry in Tally ERP 9

Now, we are going to look at the second point from the above 4 points. It is about whether you are eligible for the TDS refund or not.

We will continue with the above example of TDS of ₹50,000 but it is entirely a different transaction.

Example 3 – TDS Receivable Entry in Tally

Let’s say at the end of the year, apart from salary, you had some other income and you are now liable to pay income tax of ₹20,000 on your total income including salary.

This means you have paid extra ₹30,000 as income tax because your TDS is already deducted at ₹50,000 when you received the salary but your tax liability is only ₹20,000.

So for that, now we are going to pass a TDS Receivable entry in Tally.

But, before we pass the entry, we need to create a new ledger.

  1. It is called TDS Receivable under Loans & Advances (Assets)

The reason we create TDS Receivable ledger under Loans & Advances (Assets) is because now, ₹30,000 will be considered as loan that we have given to the Government in the form of extra TDS that was deducted.

When we give a loan to someone it is our asset, therefore we have to classify it under Loans & Advances (Assets).

If you want to know which ledger group you have to select while creating a ledger, I recommend you go through this list of ledger accounts in Tally.

By going through the above list, you will be able to determine why TDS Receivable comes under Loans & Advances (Assets).

Now, let’s move on and pass the journal entry for TDS receivable in Tally. It will be a journal voucher because there is no cash or bank account involved in this entry.

Here are the steps to pass a journal entry for TDS receivable in Tally.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Now, select Journal Voucher by pressing F7 or selecting Journal from the right hand side green bar.
  • The accounting entry for TDS receivable in Tally will be as shown below.

TDS Receivable Account Dr ₹30,000
To TDS Account ₹30,000

TDS Receivable Entry in Tally ERP 9
TDS Receivable Entry in Tally ERP 9
  • Now, the TDS in your capital account will be (₹20,000) negative because that is the amount of tax you are liable to pay. The remaining that ₹30,000 is your asset now in the form of a loan given to the government.
  • When you finally receive ₹30,000 from the government, you have to pass a simple Receipt Entry in Tally for that. Here is the entry for that.

Bank Account Dr ₹30,000
To TDS Receivable Account ₹30,000

So, this was all about when your TDS was deducted.

But what about when you have to deduct someone else’s TDS when you are making a payment to them? That is the 3rd point among the 4 points at the beginning.

You have Deducted TDS while making a payment

In the above example, your TDS of ₹50,000 was deducted when you received your salary.

Now, assume you are in place of the employer and you are deducting the TDS from your employee.

That is what we are going to look at in this part but with different numbers and a different example so you can understand it better.

So, let us take another TDS example.

Example 4 – TDS Deduction Entry in Tally while making a Payment

You have hired a painter to paint your house. Contract for the payment is ₹1,20,000 and you deduct the TDS at the rate of 10% which comes to ₹12,000.

So, the net amount that you pay to the painter after deducting TDS is ₹1,08,000 i.e. ₹1,20,000 – ₹12,000.

Now, we will pass the accounting entry with TDS for the above transaction in Tally.

TDS Deduction Entry in Tally ERP 9 while Making a Payment

For this entry we need to create one more ledger in Tally for painting expenses.

  1. Painting Expenses under Direct Expenses

Here are the steps to do the TDS entry in Tally for TDS deduction while you are paying someone.

This TDS entry can be done in both payment voucher as well as the journal voucher in Tally.
But, since we are paying the painter, we will create a Payment Voucher in Tally for this TDS entry.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Now, press F5 which is the shortcut in Tally for payment vouchers or select Payment Voucher from the right hand side green bar.
  • The accounting entry for the above transaction with TDS in the example will be as under.

Painting Expenses Dr ₹1,20,000
To TDS Account ₹12,000
To Bank Account ₹1,08,000

This entry will be exactly the same in Tally as well. Please see the picture below to make your understanding crystal clear.

TDS Deduction Entry in Tally while making a payment
TDS Deduction Entry in Tally while making a payment

Continuing with this example, we will move ahead to see last entry which from the above 4 point entries.

TDS Payable Entry in Tally ERP 9

In the above TDS entry in Tally, you deducted the TDS of ₹12,000.

Now, just assume that out of ₹12,000, you have credit of only ₹3,000 and you are liable to pay ₹9,000 to the government.

But, till the time you pay it, it will become a TDS payable for you.

The same logic will apply which we applied at the time of TDS Receivable Entry in Tally, but in a reverse way.

Let us understand it with the help of an example.

Example 5 – TDS Payable Entry in Tally

TDS payable is our liability and therefore it will be considered as a Current Liability till we pay ₹9,000 which is due to the government.

Therefore we have to create a ledger for that in Tally.

  1. It is called TDS Payable under Current Liability

So, taking the example, you are liable to pay ₹9,000 as TDS to the government. But, till the time you actually pay the TDS, it becomes TDS payable.

Therefore we have to transfer TDS to the TDS Payable Account.

Let us pass the TDS entry in Tally for the above transaction. Here is a step by step explanation.

This TDS entry will be a journal entry because there are no bank or cash accounts involved.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Then press F7 to select the Journal Voucher.
  • Accounting Entry for above TDS Payable transaction of ₹9,000 will be as shown below.

TDS Account Dr ₹9,000
To TDS Payable Account ₹9,000

TDS Payable transaction in Tally will look like in the picture below.

TDS Payable Entry in Tally ERP 9
TDS Payable Entry in Tally ERP 9

So, we have now covered all the four TDS accounting entries in Tally that we have discussed above and it covers almost all of the TDS transactions that you will ever see.

Let me bring those 4 TDS entries in Tally once again if you have forgotten it.

  1. First entry is when your TDS gets deducted while receiving the payment.
  2. Second is when you are either eligible for a TDS refund or not.
  3. Third entry is when you deduct the TDS of someone while making the payment.
  4. Fourth and lastly, you are liable to pay the TDS or not.

Now, we can move forward and see how to pass TDS entry in Tally under GST along with examples.

Let’s start quickly.

How to Pass TDS Entry in Tally ERP 9 under GST

If you have read the applicability of the TDS provisions at the beginning of this post, you will know when the TDS under GST is applicable.

Now, let us take another example to see the TDS applicability under GST and TDS entry in Tally under GST.

Firstly, we will look at the TDS accounting entry under GST where your TDS was deducted by someone else, which in this case, will be the government right now as per the rules.

Your TDS was deducted under GST

When your TDS is deducted under GST, you will get the GST credit according to the GST Act.

Now, we will see that how the TDS accounting entry under GST in Tally is done along with the help of an excellent example.

Example 6 – TDS Entry in Tally under GST – Receipt

Let’s say you are supplying goods worth ₹3,00,000 excluding GST to a public sector company which is owned by the Government of India.

For the above transaction, you will have to pass a GST Sales entry in Tally, and then when we will receive the amount from the government company, we will pass a receipt entry in Tally.

But, the government company will deduct TDS under GST and the TDS deduction rate will be 2% i.e. 1% CGST and 1% SGST.

Here is how the transaction will look.

2% of ₹3,00,000 is ₹6,000.

Therefore total TDS under GST will be 1% CGST = ₹3,000 and 1% SGST = ₹3,000 and the government will give you ₹2,94,000 after the deduction of TDS in the form of GST.

Now, let us pass the TDS entry in Tally under GST for the above transaction.

TDS Entry in Tally ERP 9 under GST – Receipt

Before we pass the above TDS entry in Tally under GST, we need to create certain ledgers which are different.

The ledgers that we need to create are:

  1. TDS – CGST – 1% under Duties & Taxes
  2. TDS – SGST – 2% under Duties & Taxes
  3. Government Company under Sundry Debtors

The reason we have to create the TDS ledgers which are used for GST under Duties & Taxes is because, you will get the GST credit for the same.

In reality, these TDS ledgers are GST Taxation ledgers. I will show you how to create the above TDS ledgers under GST in Tally.

How to Create TDS Ledgers under GST in Tally

Here are the steps:

  • From Accounts Info, go to Ledgers and then select Create under Single Ledger.
  • Now, you will be in the Ledger Creation screen.
  • First field is Name – Type TDS – CGST – 1%. We mention type of GST and percentage in the name itself, so at the time of passing the entry, we will know exactly what ledger we are using.
  • It will be under Duties & Taxes so select it from the list of ledgers.
  • Select GST from the List of Duties/Taxes.
  • Select Central Tax from Tax Types.
  • Now, if you want to maintain balances bill by bill in Tally, you can set this option to Yes. I have kept it No for now.
  • In Rounding Methods, select Normal Rounding and Rounding Limit to zero.
  • And, finally, save the ledger.

In the exact same way, you have to create TDS – SGST – 1% ledger. Just select State Tax instead of Central Tax this time.

After you have created both the TDS GST ledgers in Tally, we will pass the TDS entry in Tally under GST.

Passing the TDS Entry in Tally under GST – Receipt

For that, you need to follow the steps listed below:

  • From Gateway of Tally, go to Accounting Vouchers.
  • Now, go to Receipt voucher by pressing F6.
  • The accounting entry for above transaction with TDS and GST will be as under.

Bank Account Dr ₹2,94,000
TDS – CGST – 1% ₹3,000
TDS – SGST – 1% ₹3,000
To Government Company ₹3,00,000

This TDS entry in Tally under GST will look a little bit different in Tally because in receipt voucher in Tally, credit balances are taken first. Look at in the picture below.

TDS Entry in Tally under GST - Receipt
TDS Entry in Tally under GST – Receipt

For the above receipt entry, there will be a sales entry in Tally along with e-Way Bill in Tally, which we have not covered in this post due to length of this post.

So, this was the TDS entry in Tally under GST, when someone deducts your GST.
Now, we will see the opposite side as if you are the government company and we will do the exact same entry.

Let’s start without any delay.

You deducted someone else’s TDS under GST

In this case, you assume that you are a government company and are deducting the TDS.

This TDS entry in Tally will be different but the GST – TDS ledgers will be the same because they can be used both ways i.e. while receiving as well as making the payment under GST.

We will use the payment voucher for this TDS entry under GST because we are paying someone.

Let me show the whole transaction with the example and then we will pass the accounting entry for it in Tally as well.

Example 7 – TDS Entry in Tally under GST – Payment

You are a government company and you made the payment of ₹3,00,000 to a person named Amit who is your creditor.

But, you deducted TDS in the form of GST at 2%. It will be 1% CGST = ₹3,000 and 1% SGST = ₹3,000, according to the GST Act.

In total, you only made the payment of ₹2,94,000 via bank account and rest ₹6,000 you have to pay to the government or your GST credit will get reduced by ₹6,000.

Now, let us do the above GST transaction with TDS in Tally.

TDS Entry in Tally ERP 9 under GST – Payment

We need to create one more ledger before you pass the TDS entry under GST for the payment of ₹3,00,000.

  1. It will be Amit under Sundry Creditors.

Now, let us do the TDS entry in Tally for the above example. Here are the steps.

  • From Gateway of Tally, go to Accounting Vouchers.
  • Select Payment Voucher by pressing F5.
  • Now, we will do the TDS accounting entry which is as under.

Bank Account Dr ₹2,94,000
TDS – CGST – 1% ₹3,000
TDS – SGST – 1% ₹3,000
To Government Company ₹3,00,000

It will look exactly the same in Tally as you can see in the picture below.

TDS Entry in Tally under GST - Payment
TDS Entry in Tally under GST – Payment

This was the TDS entry in Tally under GST when you are making a payment to someone

TDS Entry in Tally ERP 9 with GST – PDF

This was a long post. In fact, a very long post. Therefore, you can download the PDF version of this post including everything, in the PDF below.

Download the TDS in Tally - PDF

Video – TDS Entries in Tally ERP 9 – GST Included

Conclusion

We have looked at all the accounting entries that are required for operating TDS in Tally.

TDS in Tally is something that is very easy but yet many people find it difficult to understand because of its accounting nature.

What most of the people get confused about TDS accounting entries in Tally is accounting and that is what I have focused most upon in this post.

Let me summarize for you what you have learned from this post and the video.

  • About TDS or we can say TDS tax, if you know what I mean.
  • Then, TDS entries in Tally ERP 9
  • After that, we looked at TDS Receivable entries in Tally and TDS Payable Entries in Tally.
  • Later, we saw TDS in Tally under GST along with examples. There are total 7 examples in this post, to be precise.

If you have come this far and also watched the video, you truly are a great person who really wants to know everything there is about TDS in Tally with GST.

Still, if you feel there is something left, about TDS in Tally in this post, or you have any problem, doubt, suggestion or a Tally TDS question, please comment down below.

I answer each and every comment.

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2 thoughts on “TDS Entry in Tally with GST – 7 Easy Examples – PDF Download

    • Rishit Shah says:

      Hi, Rahul!

      Thank you for your concern but both the last and second last entries are different.
      In the last entry, you are paying the money on which TDS is deducted and in the second last entry, you are receiving the money on which TDS is deducted.

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