Global
United States
United Kingdom
Canada
Australia
India
Saudi Arabia
United Arab Emirates
Bahrain
Kuwait
Oman
Qatar
Kenya
Mexico
South Africa
Germany

Direct Taxes

The Government of India introduced TDS (Tax Deducted at Source) to collect taxes directly from the source of income, ensuring a steady flow of revenue. The tax amount is deducted by the customer at the time of payment for a transaction and then deposited with the government.

You can apply TDS to the transactions you create in Zoho Invoice. Here is a list of transactions where you can apply TDS:

TDS

Tax Deducted at Source (TDS) is the tax collected by the government at the source of income. TDS can be applied to various sources of income, such as rent, salary, etc.

When Should TDS be Deducted?

The Income Tax Department sets the rates for TDS deductions. In a transaction, the person or organisation receiving the payment is called the deductee, while the person or organisation deducting TDS from the payment made is called the deductor. TDS is deducted before making the payment, and the tax amount is then deposited with the government. TDS is deducted for all kinds of payments (cash, cheque, or credit), and it is linked to the PAN of both parties.

Scenario: Patricia is a freelancer providing graphic design services. She has completed a project for her client Charles and issued an invoice for ₹1,00,000. The applicable TDS rate for her services is 10%. Charles 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. Charles 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 Invoice

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

By default, you can apply TDS to your transactions at the transaction level. You can also configure the preferences to apply TDS to your transactions. Here’s how:

Apply TDS at Transaction Level

To apply TDS at the transaction level:

The TDS tax has been applied at the transaction level.

TDS Override

Once you add a TDS rate to your transaction, you will also be able to update the TDS amount deducted from the taxable amount of your transaction. To override TDS in a transaction (say, Invoices):

Note: You can override TDS only at the transaction level.

Apply TDS at Line Item Level

Zoho Invoice allows you to apply TDS to the transactions at line item level by configuring the Tax Preferences. To apply TDS at line item level for the transactions you record in Zoho Invoice:

The TDS tax has been applied at the line item level. You can also apply TDS cess and TDS surcharge to the TDS amount deducted from the transaction.

TDS Surcharge

TDS surcharge is an extra charge added to the TDS amount for payments made to high-income individuals or entities. It is calculated on the TDS amount to ensure those with higher earnings pay more in taxes. To create a TDS surcharge for the transactions:

Now, you can either apply the TDS surcharge to your transaction directly or along with another TDS tax as a TDS group by clicking + New TDS Group in the top right corner.

TDS Cess

TDS Cess is the additional tax that is levied on the TDS that is deducted from a transaction. It is levied on various purposes like education, health, infrastructure, etc. To create a TDS Cess for the transactions:

TDS Withheld

When you apply TDS to a transaction, the respective TDS amount will be deducted or withheld at the time of sale. You can record this withheld amount when you record the payment for the transaction in Zoho Invoice. Learn more about withholding TDS while recording payments.

Was this document helpful?
Yes
No