Income TDS

Tax Deducted at Source (TDS) is a tax deducted from transactions at the source of income. The person or business making the payment is responsible for deducting TDS and is called the deductor. The person or business receiving the payment and earning the income is called the deductee. The deductor deducts the applicable tax from the payment and pays it to the government on behalf of the deductee. You can configure and apply Income TDS to transactions for applicable payments, such as rent, salary, and professional fees.

You can apply TDS to the following transactions in Zoho Books:

Quotes
Sales Orders
Invoices
Customer Debit Notes
Recurring Invoices
Payments Received
Credit Notes
Purchase Orders
Bills
Vendor Credit Notes
Recurring Bills
Vendor Advances
Vendor Credits

When Should TDS be Deducted?

TDS should be deducted when a payment is subject to TDS under the applicable provisions of the Income Tax Act. TDS applies to all payment modes, such as cash, cheque, and bank transfer. The Income Tax Department specifies the applicable TDS rates and the types of transactions on which TDS must be deducted.

Scenario: Patricia is a freelancer providing graphic design services. She has completed a project for her client Aaron and issued an invoice for ₹1,00,000. The applicable TDS rate for her services is 10%. Aaron will deduct 10% of the invoice amount as TDS before making the payment (10% of ₹1,00,000) and pay Patricia the remaining ₹90,000. Aaron will then deposit the ₹10,000 with the government and provide Patricia with a TDS certificate, which she can use while filing her income tax return to claim credit for the tax deducted.

Apply TDS to Transactions in Zoho Books

You can apply TDS to the transactions you create in Zoho Books in two ways:

To configure this:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Settings.
Select At Transaction Level to apply TDS to the transaction’s subtotal or At Line Item Level to apply TDS to individual line items.
Click Save.

Once configured, Zoho Books will apply TDS to new transactions based on the selected setting.

Apply TDS at Line Item Level

To apply TDS at the line item level:

Open the transaction you want to update, or create a new transaction.
In the Item Table, select the applicable tax in the TDS column for each required line item. If the required TDS tax is not listed, click + New TDS Tax to create one.
Click Save. The selected TDS rate will be applied to each specified line item.

You can also update TDS for multiple line items at once. To update TDS in bulk:

Open the transaction you want to update, or create a new transaction.
In the Item Table, select the line items for which you want to update TDS.
Click Update TDS.
Select the TDS rate you want to apply to the selected line items.
Click Save.

The selected TDS rate will be applied to all the selected line items.

Apply TDS at Transaction Level

To apply TDS at the transaction level:

Open the transaction you want to update, or create a new transaction.
In the Total section below the Item Table, select TDS.
Select the applicable tax from the dropdown. Zoho Books applies it to the Sub Total of your transaction.
If the required TDS rate is not listed in the dropdown, create a TDS tax rate and apply it to the transaction.
Click Save.

The TDS tax will be applied at the transaction level.

Update TDS in transactions

After you add a TDS rate to a transaction, you can update the TDS amount deducted from the taxable amount.

To update TDS in a transaction:

Go to the required transaction in which you want to update the TDS.
Below the Item Table, in the TDS section, click the Edit icon next to Total TDS amount.
In the pop-up that appears, enter the required amount to be deducted.
Click Update.

The TDS amount applied to the transaction will be updated accordingly.

Create TDS Taxes

You can create TDS taxes in Zoho Books and apply the appropriate tax rates to your items and transactions.

To create a TDS tax:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Rates.
Click + New TDS Tax at the top right.
Enter the following details:

Field	Description
Tax Name	Enter a name for the TDS tax.
Rate (%)	Enter the applicable TDS rate.
Applicable Income Tax Act	Select the applicable Income Tax Act.
Section	Select the section applicable for the TDS rate.
TDS Payable Account and TDS Receivable Account	By default, Zoho Books tracks TDS under the TDS Payable and TDS Receivable accounts. Click Edit to select different accounts.
This is a Higher TDS Rate	Select this option if the TDS tax is a higher rate and select Reason for Higher TDS Rate from the dropdown.
Applicable Period	Optionally, select the start date and end date for which the TDS tax applies.

Click Save.

The new TDS tax becomes available for applicable items and transactions.

Create TDS Surcharge

A TDS surcharge is an additional charge on the TDS amount for payments made to high-income individuals or businesses.

Note: You can apply a TDS surcharge only as part of a TDS group. You cannot apply it directly.

To create a TDS surcharge:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Click the dropdown next to + New TDS Tax in the top right corner.
Select + New TDS Surcharge from the dropdown.
Enter the Tax Name and the Rate for the TDS surcharge.
By default, Zoho Books tracks the TDS surcharge under the TDS Payable Account and the TDS Receivable Account. Click Edit to select different accounts.
Click Save.

The TDS surcharge becomes available when you create a TDS group.

Create TDS Cess

TDS cess is an additional tax calculated on the sum of the TDS amount and the TDS surcharge amount. It may apply to purposes such as education, health, and infrastructure.

Note: You can apply a TDS cess only as part of a TDS group. You cannot apply it directly.

To create a TDS cess:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Click the dropdown next to + New TDS Tax in the top right corner.
Select + New TDS Cess from the dropdown.
Enter the Tax Name and the Rate for the TDS cess.
By default, Zoho Books tracks the TDS cess under the TDS Payable Account and the TDS Receivable Account. Click Edit to select different accounts.
Click Save.

The TDS cess becomes available when you create a TDS group.

Create TDS Group Taxes

Create a TDS group to combine one TDS tax with a TDS surcharge and TDS cess. You can create a TDS group only with a TDS tax that falls under Section 393(2), Sl. 17.

Note:

You can apply TDS group taxes only to bills and vendor advances.
Create the required TDS surcharge and TDS cess before you create a TDS group tax.

To create a TDS group tax:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Click + New TDS Group in the top right corner.
Enter the TDS Group Tax Name.
Optionally, under Applicable Period, select the Start Date and End Date.
Under Associate TDS Rates, select the applicable section and a TDS tax.
Select the applicable TDS Surcharge and TDS Cess to include in the group.
Click Save.

Record TDS Deducted by Customers

When you record a payment for an invoice, you can record the TDS amount deducted by the customer.

To record TDS deducted by a customer:

Go to Sales on the left sidebar and select Invoices.
Select the invoice for which you want to record the withheld TDS.
Click Record Payment.
On the Payment Details page, select Yes, TDS next to Tax Deducted?.
Select the TDS Tax Account.
Enter the Amount Withheld.
Click Record Payment.

The recorded payment includes the TDS amount deducted by the customer.

Apply TDS to Vendor Advances

Zoho Books allows you to apply TDS to the advance you pay your vendor, so you can deduct the required TDS amount from the advance payment and pay the remaining balance to your vendor.

To apply TDS to a vendor advance:

Go to Purchases on the left sidebar and select Payments Made.
Click + New in the top right corner.
Select the Vendor Advance tab.
Enter the required details.
Select a tax in the TDS field.
Click the Edit icon next to the TDS Amount field to update the TDS amount, if required.
Click Save.

TDS will be applied to the vendor advance.

Edit TDS Taxes

To edit a TDS tax:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Rates.
Hover over the tax and select Edit.
Update the required details.
Click Save.

The changes apply only to new transactions. Existing transactions retain the previous tax details.

Delete TDS Taxes

To delete a TDS tax:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Rates.
Hover over the tax and select Delete.
Click Delete in the confirmation pop-up.

You cannot delete a tax that is associated with transactions. Mark it as inactive instead.

View Associated Transactions

To view the transactions associated with a TDS tax:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Rates.
Hover over the tax and select View Associated Transactions.

Zoho Books displays the transactions in which the tax is applied. Check this before you edit or delete a tax to understand its impact.

Filter TDS Taxes

You can filter the TDS rates displayed on the Income TDS Rates page based on their status.

To filter TDS taxes:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Under TDS on the side pane, select Income TDS Rates.
Click the Active TDS Rates dropdown above the tax list.
Select the status of the TDS rates you want to view.

Zoho Books displays the TDS rates that match the selected status.

Import and Export TDS Taxes and Groups

You can import or export TDS taxes and TDS tax groups from the Direct Taxes page.

To import or export TDS taxes and groups:

Go to Settings.
Under Organisation Settings, go to Taxes & Compliance and select Direct Taxes.
Click the More icon in the top right corner.
Select one of the following options:
- Import TDS Taxes
- Export TDS Taxes
- Import TDS Tax Groups
- Export TDS Tax Groups

Learn how to import and export data in Zoho Books.

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