Recording TDS Transactions for Expenses in Tally Prime

In Tally Prime, recording TDS transactions ensures compliance with tax laws by deducting Tax Deducted at Source (TDS) on applicable expenses. This step-by-step guide explains how to record TDS transactions for expenses with a real-world example.

Step-by-Step Guide

Step 1: Enable TDS in Tally Prime

Ensure that the TDS feature is enabled in your Tally Prime configuration:

1. Go to Gateway of Tally > F11: Features.
2. Select Statutory & Taxation.
3. Set Enable Tax Deducted at Source (TDS) to "Yes".
4. Set Set/Alter TDS Details to "Yes".
5. Press Ctrl+A to save the settings.

Step 2: Configure TDS Duty Heads

Set up TDS rates and thresholds for the applicable expenses:

1. Go to Gateway of Tally > Accounts Info > Statutory Info.
2. Select TDS Duty Heads > Create.
3. Enter details such as:
   • Duty Head: "TDS on Professional Services"
   • Nature of Payment: "Professional Fees"
   • Applicable Section: "194J"
   • Threshold Limit: ₹30,000
   • TDS Rate: 10%
4. Press Ctrl+A to save the duty head.

Step 3: Create or Alter Ledgers

Create or modify ledgers for expenses and parties to include TDS details:

1. Go to Gateway of Tally > Accounts Info > Ledgers.
2. Create or alter an expense ledger, e.g., "Professional Fees".
3. Under Tax Information, select the appropriate TDS duty head, e.g., "TDS on Professional Services".
4. Create or alter a party ledger, e.g., "ABC Consultants", and ensure that Is TDS Applicable is set to "Yes".
5. Save the ledgers by pressing Ctrl+A.

Step 4: Record the Expense with TDS Deduction

To record an expense and deduct TDS:

1. Go to Gateway of Tally > Vouchers.
2. Select the Journal voucher type.
3. Enter the following details:
   • Date of the transaction
   • Debit the expense ledger, e.g., "Professional Fees" with the full amount, e.g., ₹50,000.
   • Credit the TDS ledger, e.g., "TDS on Professional Services" with the deducted amount, e.g., ₹5,000 (10% of ₹50,000).
   • Credit the party ledger, e.g., "ABC Consultants" with the net payment amount, e.g., ₹45,000.
4. Save the voucher by pressing Ctrl+A.

Step 5: Track TDS Payable

Tally Prime automatically tracks TDS payable amounts for remittance to the government:

1. Go to Gateway of Tally > Display More Reports.
2. Select Statutory Reports > TDS Reports.
3. Review the TDS payable amount and its due date.

Example: Recording TDS on Professional Fees

Consider the following scenario:

• Expense: Professional Fees of ₹50,000 paid to "ABC Consultants".
• Applicable TDS Rate: 10% under Section 194J.

When recording the journal voucher, the following entries are made:

This ensures compliance with TDS requirements and accurate tracking of expenses.

Conclusion

Recording TDS transactions for expenses in Tally Prime is straightforward and ensures compliance with tax laws. By following the steps outlined in this guide, businesses can accurately deduct and manage TDS, minimizing the risk of errors and penalties while maintaining proper financial records.