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https://help.tallysolutions.com/docs/te9rel49/Tax_Deducted_at_Source/Income_Foreign_Indian_Co_Sec_194LC.htm

TDS on Income From Foreign Currency, Bonds or Shares of Indian Company (Sec 194LC)

 

Under section 194LC of the Income Tax Act, 5% TDS is deductible on interest payments made to non-resident individuals/companies.

In Tally.ERP 9, if PAN for the deductee is not specified in the party ledger, 20% TDS would be deducted.

In adherence to the amendments made to Finance Act 2013, w.e.f 1.6.2013,  tax will be deducted at the rate of 5%  for the Nature of Payment Income From Foreign Currency, Bonds Or Shares of Indian Company irrespective of PAN being specified in the party ledger.

Such transactions can be recorded in Tally.ERP 9 using the Journal Voucher, Purchase Voucher, or the Credit Note.

In this illustration, Journal Voucher is used.

Example:

ABC Company paid Rs. 50,000 by way of interest on shares, to Phoenix Media on 6.6.2013.Phoenix Media's PAN is not available with ABC Company.

Step 1: Create Expenses Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

  • Enter Interest paid U/s 194LC as the Ledger Name.

  • Select the group Indirect Expenses from the List of Groups

  • Set Inventory values are affected to No

  • Set Is TDS Applicable to Yes

  • Select Income From Foreign Currency, Bonds Or Shares of Indian Company in Default Nature of Payment field

  • Press Enter to save

Step 2: Create Tax Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

  • Enter TDS – Interest Payment U/s 194LC as the Ledger Name.

  • Select Duties & Taxes from the List of Groups in the Under field.

  • In Type of Duty /Tax field select TDS from the Types of Duty/Tax list

  • In Nature of Payment field, select Income From Foreign Currency, Bonds Or Shares of Indian Company

  • Press Enter to save

Step 3: Create Party Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

  1. Enter Phoenix Media as the Ledger Name.

  2. Select Sundry Creditors from the List of Groups in the Under field

  3. Set Maintain balances bill-by-bill to Yes

  4. Enter the Default Credit Period, if required.

  5. Set Is TDS Deductable to Yes

  6. In the field Deductee Type, select Individual/HUF - Non Resident from the List of Deductee Types

  7. Enter Address, State and PIN Code under Mailing Details

  8. Enter PAN, if available. Here, Phoenix Media has not provided ABC Company with their PAN.

Note: From Rel 4.8 an option to provide Bank Details is provided in the Ledger Master.

  1. Press Enter to save

Step 4: Record the Transaction in Journal Voucher

  1. Press F2 and change the date to 06-6-2013

  2. Select Interest paid U/s 194LC in the Debit field

  3. Enter 50,000 in the Amount field

  4. In the TDS Nature of Payment Details screen, accept the default details.

  5. Select Phoenix Media in the Credit field

  6. In TDS Details Screen

  7. Select New Ref in Type of Ref  field

  8. In the Name field, accept the default TDS reference number. Here, it is Jrnl /1-1

  9. In Nature of Payment field select Income From Foreign Currency, Bonds Or Shares of Indian Company from the List of Nature of Payment(s).

Note: For transactions recorded with a date prior to 1.6.2013, if PAN is not specified in the party master, on selection of TDS Nature of Payment, TDS will be deducted at 20%. Tally.ERP 9 displays the warning message stating that TDS is deducted at higher rate i.e. 20% if PAN is not furnished.

  • Select TDS – Interest Payment U/s 194LC in the TDS Duty Ledger field

  • Set Deduct Now to Yes to deduct the income tax in the same voucher.

  • The TDS Amount field displays the Tax amount deducted at source

  • The Payable Amount field displays the amount payable to the Party, minus the TDS amount.

  1. Payable Amount as calculated in the TDS Details screen will be filled in the Party’s Amount (Credit) field.

  2. In Bill–wise Details screen

  3. Select New Ref in Type of Ref field

  4. In the Name field enter the Bill name PM01

  5. Skip Due Date or Credit Days field

  6. Accept the default amount allocation, and the Dr/Cr selection. Tally.ERP 9 automatically displays the Bill amount as the credit amount in the Voucher Creation screen.

  7. In Type of Ref field, select New Ref and enter bill name PM01

  8. Skip Due Date or Credit Days field and accept the default amount allocation and Dr/Cr. By default Tally.ERP 9 displays the Tax amount in the amount field as the debit balance, in the Voucher Creation screen.

  1. In the Credit field select TDS – Interest Payment U/s 194LC from the List of Ledger Accounts and Rs. 2,575 (50,000 – 47,425) is displayed automatically in the amount field.

  2. Enter Narration, if required

  1. Press Enter to save.

The transaction will be reflected in TDS Computation report.

Hence, TDS has been deducted at normal rate (5%), though PAN has not been specified for Phoenix Media.

 

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