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Tax Deducted At Source (TDS)

TDS means Tax Deducted at Source. The concept of TDS was introduced in the Income Tax Act, 1961, with the objective of deducting the tax on an income, at the source of income. It is one of the methods of collecting Income Tax, which ensures regular flow of revenue to the Government.

TDS Process

  1.  Deductee (Seller) provides Services and Bill to the Deductor (Buyer).
  2.  Deductor makes the payment after deducting TDS.
  3.  Deductor remits the TDS amount into Bank (Treasury).
  4.  Bank (Treasury) remit the amount to the Government Account.
  5.  Deductor Issues Form 16A to Deductee for the TDS amount deducted.
  6.  Deductor Files the e-TDS to NSDL.
  7.  NSDL uploads the e-TDS information to Income Tax Department.
  8. Deductee Files the Return with Form 16A to Income tax Department.

Example :


Received Invoice from Swayam Associates, Chartered Accountant, towards Internal Audit of Accounts Rs.25,000


Paid Rs. 22,425 to Swayam Associates towards his Invoice after deducting TDS Rs.2,575 on amount payable to him.


Paid Rs. 2,575 by cheque of Axis Bank towards TDS on Internal Audit to the Authorized Bank Treasury.


Solutions :


Step 1 :

In F11 : Features ( F3 : Statutory)

  • Enable Tax Deducted at Source (TDS)  to YES.
  • Set / Alter TDS Details to YES
Tax Deducted At Source (TDS) in Tally.ERP9

The fields in the screen are as follows :

  • Tax Assessment Number (TAN) is a 10-digit alphanumeric number issued by the Income Tax Department (ITD) to the Deductor.
  • Income Tax Circle / Ward (TDS) is issued by the Income Tax Department and represents the area where the deductor is supposed to file TDS Returns.
  • Deductor Type : Government or  Others
  • Name and Designation of the authorized person who is responsible to file TDS Returns.

Step 2 :

Create Ledger à Swayam Associates under Sundry Creditor. Ensure that the details are as shown in the following figure :
Tax Deducted At Source (TDS) in Tally.ERP9
Tax Deducted At Source (TDS) in Tally.ERP9

Debit : Internal Audit Expenses à Rs. 25,000

Credit : Swayam Associates à Rs.25,000


In the Bill Wise Details screen, enter the details as per the following illustration.

Tax Deducted At Source (TDS) in Tally.ERP9
Tax Deducted At Source (TDS) in Tally.ERP9
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