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Record TDS under Rule 37BC in TallyPrime

For payments to non-residents, you can apply the normal or lower TDS rate when the party is eligible for relaxation under Rule 37BC. You can create separate Nature of Payment masters for Rule 37BC-eligible and non-eligible transactions.

Configure Nature of Payment for Rule 37BC

While creating the TDS Nature of Payment,

1. Press F12 (Configure) > enable Allow relaxation in rate for Non-Residents, and press Ctrl+A to save the configuration.
2. Enter the Name, Section, and Payment Code for the Nature of Payment, as required.
3. Set Relaxation in rate for Non-Residents (as per Rule 37BC) to Yes.
4. Enter the TDS rate and Threshold/exemption limit, if applicable.
   
5. Press Ctrl+A to save.

Similarly, for non-eligible transactions, create another Nature of Payment with the same Section and Payment Code with Relaxation in rate for Non-Residents (as per Rule 37BC) set to No.

It is recommended to maintain separate Nature of Payment masters for Rule 37BC-eligible and non-eligible transactions.

Record TDS under Rule 37BC

In the Journal voucher, select the Nature of Payment based on whether the non-resident party is eligible for Rule 37BC relaxation.

For an eligible party:

1. Debit the applicable expense ledger and enter the amount.
2. Credit the party ledger and enter the amount.
   The TDS amount is deducted based on the selected Nature of Payment.
3. Enter the Bill-wise Details, as required.
4. Credit the applicable TDS ledger.
5. Select the Nature of Payment configured for Rule 37BC from the List of TDS Nature Of Pymt.
   
6. Press Ctrl+A to save the transaction.

For a non-resident party not eligible for Rule 37BC relaxation, select the Nature of Payment with the option Relaxation in rate for Non-Residents (as per Rule 37BC) to No. TDS is then deducted at the applicable default higher rate.

Questions and Answers

1. How does Rule 37BC affect TDS when PAN is not available?
   When PAN is not available and Relaxation in rate for Non-Residents (as per Rule 37BC) is set to No in the Nature of Payment, TDS is deducted at the default higher rate applicable to the Section and Payment Code.
2. How are Rule 37BC transactions shown in Form 27Q?
   Transactions where Rule 37BC relaxation applies appear under Deduction at Normal Rate. Transactions where the relaxation does not apply and the higher rate is used appear under Deduction at Higher Rate.