https://help.tallysolutions.com/docs/te9rel64/Tax_India/tds/tds-on-interest-paid-on-overdue.htm

TDS on Interest Paid Towards Overdue Payments

The following chain of transactions will help you deduct TDS against interest payable/paid on overdue payments to suppliers/parties.

Activating Interest Calculation

To activate interest calculation

1. Go to Gateway of Tally > F11: Features > Accounting Features .

2. Enable the option Activate Interest Calculation?

3. Enable the option Use advanced parameters?

4. Press Ctrl+A to accept.

Interest calculation in party master

To alter party ledger and enable interest calculation

1. Go to Gateway of Tally > Accounts Info. > Ledgers > Alter > Select the party ledger.

2. Set the option Activate interest calculation? to Yes . The Interest Parameters screen appears.

o Set the options in the Interest Parameters screen as shown below:

o Press Ctrl+A to accept the interest parameters.

3. Press Ctrl+A to save the ledger.

TDS Duty Ledger for Interest

To create duty ledger

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

2. Enter the Name of the ledger.

3. Select Duties & Taxes group in the field Under .

4. Select TDS in the field Type of duty/tax .

5. Select Interest Other Than Interest on Securities in the field Nature of payment .

6. Set the option Inventory values are affected? to No .

7. Set the option Activate interest calculation? to No .

8. Press Ctrl+A to save.

Expense Ledger for Interest Amount

To create expense ledger

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

2. Enter the Name of the ledger.

3. Select Indirect Expenses group in the field Under .

4. Set the option Inventory values are affected? to No .

5. Set the option Activate interest calculation? to No .

6. Set the option Is TDS applicable? to Yes .

7. Select Interest Other Than Interest on Securities in the field Nature of payment .

8. Press Ctrl+A to save.

Record Journal Voucher for the Amount Payable

To record a journal voucher (to book the expenses)

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Debit Advertisement Expenses from the List of Ledger Accounts .

3. Enter the Amount under Debit .

4. Credit the party ledger and press Enter from the Credit field. The Bill-wise Details screen appears.

o Select New Ref in the field Type of Ref .

o Enter the a unique reference number in the field Name .

o Press Enter to select the amount displayed in the field Amount .

o Press Enter . The Interest Parameters screen appears.

o Accept the parameters in the Interest Parameters screen OR change them if required.

o Press Enter to return to Bill-wise Details screen.

o Select New Ref in the field Type of Ref .

o Enter the a unique reference number in the field Name .

o Press Enter to select the TDS amount displayed in the field Amount .

o Press Enter . The Interest Parameters screen appears.

o Enter zero in the Rate field in the Interest Parameters screen.

o Press Enter twice to return to voucher screen.

5. Select TDS duty ledger. TheĀ TDS amount will be defaulted automatically.

6. Enter Narration , if any.

7. Press Enter to save.

Create Voucher Class for Credit Note Voucher

To create voucher class for automatically calculating interest

1. Go to Gateway of Tally > F11: Features > Accounting Features .

2. Set the option Use debit and credit notes? to Yes .

3. Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter > select Credit Note .

4. Tab down to the field Name of Class in the Voucher Type Alteration screen.

5. Enter Name of Class and press Enter to view the Voucher Type Class screen.

o Set Use Class for Interest Accounting? to Yes .

o Press Enter to return to Voucher Type Alteration screen.

6. Press Ctrl+A to save.

Note: Voucher class in credit note is created to account the interest payable to the party.

Accounting for Interest on over due payment

To record a credit note (to accounting interest on over due payment)

1. Go to Gateway of Tally > Accounting Vouchers > Ctrl+F8: Credit Note .

2. Select name of the voucher class created from the Voucher Class List in the Change Voucher Type screen.

3. Press F2 and set the date to day on which the interest amount becomes due.

4. Select party to whom interest has to be paid from the List of Ledgers to view the Interest Details screen.

o Select required bill from the List of Interest Bills in the Interest Details screen.

o Press Enter to return to the voucher screen.

5. Press Enter the from the Credit field. The credit amount will be displayed automatically.

o Select New Ref as the Method of Adjustment in the Type of Ref field in the Bill-wise Details screen.

o Enter a unique number in the field Name .

o Skip Due Date , or Credit Days fields.

o Accept the default allocation in the Amount field.

o Press Enter . The Interest Parameters screen appears.

o Set zero in the field Rate in the Interest Parameters screen.

o Press Enter .

6. Debit the ledger created for interest payable. The amount appears automatically under Debit .

7. Enter Narration , if required.

8. Press Enter to save.

Deducting TDS for the Interest Payable

A journal voucher has to be recorded for TDS deduction against the credit note recorded for interest payable amount. However, without a reference number, the TDS deduction transaction cannot be recorded.

Since TDS reference was not used in credit note it is flagged as an exception in TDS returns report. Resolve this exception to generate a reference that can be used for recording TDS deduction transaction.

To resolve the exception and generation TDS reference

1. Go to Gateway of Tally > Display > Statutory Reports > TDS Reports > Form 26Q .

2. Select Uncertain Transactions .

3. Press Enter . The Summary of Exceptions screen appears.

4. Select No link is available in booking and booking with deduction voucher under Booking & Booking with Deduction Entries .

5. Press Enter . The TDS Booking Not Linked Details screen appears.

6. Click F3: Link All to create link for the TDS booking transaction.

7. Press Esc to return to Form 26Q screen.

The amount of TDS deductable appears under Balance Deductable .

To record a journal voucher for to deducting TDS

1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal .

2. Press Ctrl+P to view TDS Deductions screen.

o Accept the date displayed in the Till Date field.

o Select party to whom interest is paid form the List of Ledgers .

o Select Interest Other than Interest on Securities in the field Nature of Payment .

o Select the duty ledger created for TDS on interest in the field Duty Ledger field. The TDS amount will be auto-fill with the respective bill details.

4. Press Enter from the Amount field. The Bill-wise Details screen appears.

o Select Agst Ref in the field Type of Ref .

o Select the bill reference for the interest amount.

o Press Enter to return to voucher screen.

5. Enter Narration , if required.

6. Press Enter to save.

Payment of interest and bill amount to the party

To record a payment voucher (payment of bill amount with interest)

1. Go to Gateway of Tally > Accounting Vouchers > F5: Payment .

2. Select bank account ledger in the field Account .

3. Select the party ledger under Particulars .

4. Enter the bill amount plus interest in the field Amount and press Enter . The Bill-wise Details screen appears.

o Select both the bill amount and interest amount reference.

o Press Enter .

5. Enter Narration , if required

6. Press Enter to save.

Note: Select interest amount alone if only interest is paid to the party.