With holding tax configuration. Withholding Tax is also called as retention tax.

Its
requirement of Government to deduct or withhold a particular percentage from paying to
the vendor and pay such amount to the Government on behalf of other person. It’s a kind
of Indirect Tax

1.Define business Place = Path – SPRO- IMG- CROSS APPLICATION COMPONENT-General Application Functions
-Cross-Application Document Numbering OR Select Define business place.
Enter company code and Allot 4 digit
number and Description.
2. Check withholding tax in contries Path –
SPRO-Fianancial Accounting Global Setting (New) –with holding tax – Extended withholding tax-Basic Settings-
Check withholding tax in contries.
Enter – Select county from List and
b.wcty – Enter 4 digit country
c.Enter Description.
3.Define Withholding Tax Keys
Here we have to mention different section applicable. The flow for the configuration is such that firstly the Withholding Tax
Key (e.g. 194C) is to be created then under that Withholding Tax type is created one at the time of invoice and other at the time of
payment and then based on the different rates prevailing in the Income tax Act, different Tax Codes are to be created (e.g. for 194C, 2
different rates are there in the Act, one is 1% TDS on the contract basis and second is 2% TDS on the sub-contract basis).

SPRO-Fianancial Accounting Global Setting (New) –with holding tax – Extended

withholding tax-Basic Settings-Check withholding tax key
4. Define Business Place ( Map company code and Section Code)

SPRO-Fianancial Accounting Global Setting (New) –with holding tax –

Extended withholding tax-Basic Settings-INDIA - Define Business Places
Click on new Enteries and enter Company code and section code we have created
5.Mapping of Business Place and Section Code

Path- SPRO-Fianancial Accounting Global Setting (New) –with holding tax – Extended withholding tax-Basic Settings-
INDIA - Define Section Code
6. Define Withholding Tax Type for Invoice Posting
In this activity you define the withholding tax type for the posting at the time of
entering an invoice. This withholding tax type does not have any effect on the
payment.

Path - SPRO-Fianancial Accounting Global Setting (New) –with holding tax –

Extended withholding tax- Calculation-withholding tax type- Define Withholding
Tax Type for Invoice Posting.

Click on New Entries –Enter 2 digit alpha numeric code and enter required data

.
T1 & T2 Created
7. Define Withholding Tax Type for Payment Posting
In this activity you define the withholding tax type for posting at the time
of paying. You also have to enter the withholding tax information when
entering the document for this withholding tax type.

Path - SPRO-Fianancial Accounting Global Setting (New) –with holding tax

– Extended withholding tax- Calculation-withholding tax type- Define
Withholding Tax Type for Payment Posting.
8. Check Recipient Types
In this activity, you check the type of recipient for 1042 reporting in the USA and withholding tax
reporting in Spain. The type of recipient categorizes the vendor, which is necessary for printing the
withholding tax form

PATH - SPRO-Fianancial Accounting Global Setting (New) –

with holding tax – Extended withholding tax-Basic Settings-
Check Recipient Types
Enter Country = IN ans Enter with holding
tax type we have created (i.e –T1,T2,T3)
9. Define Withholding Tax Codes
In this activity you define the withholding tax codes.
SPRO-Fianancial Accounting Global Setting (New) –with holding
tax – Extended withholding tax- Calculation-WITH HOLDING
TAX CODE – DEFINE WITHOLDING TAX CODE.
10. Assign Withholding Tax Types to
Company Codes
In this activity you assign withholding tax
categories to company codes.
Path - SPRO-Fianancial Accounting Global
Setting (New) –with holding tax – Extended
withholding tax- COMPANY CODE- Assign
Withholding Tax Types to Company Codes
11. Activate Extended Withholding Tax
In this activity you activate extended
withholding tax.
SAP provides you with two procedures for
processing withholding tax:
"Standard" and extended withholding tax.
"Standard" withholding tax is the procedure
that has always been supported by the
system.
11.
11. Create G/L for TAX
t CODE - FS00
12. Define Accounts for Withholding Tax to
be Paid Over.

Path – SPRO – IMG-Financial Accounting

Global Settings  Withholding Tax  Extended
Withholding Tax-  Postings-  Accounts for
Withholding Tax - Define accounts for
withholding tax to be paid over
13.Define Numbering Classes
In this activity you maintain the numbering classes.

Path – SPRO – IMG-Financial Accounting Global

Settings  Withholding Tax  Extended Withholding
Tax-  Postings-  Accounts for Withholding Tax -
Certificate Numbering for Withholding Tax-
Define Numbering Classes
14.Define Numbering Groups

PATH- Path – SPRO – IMG-Financial Accounting Global

Settings  Withholding Tax  Extended Withholding
Tax-  Postings-  Accounts for Withholding Tax - Certificate
Numbering for Withholding Tax- Define Numbering Groups
14. Define Number Ranges.

T CODE - OBWZ

PATH- Path – SPRO – IMG-Financial Accounting Global

Settings  Withholding Tax  Extended Withholding
Tax-  Postings-  Accounts for Withholding Tax -
Certificate Numbering for Withholding Tax- Define Number
Ranges
15. Assign Numbering Group to Numbering Class-
PATH --SPRO – IMG-Financial Accounting Global Settings  Withholding
Tax  Extended Withholding Tax-  Postings-  Accounts for Withholding
Tax - Certificate Numbering for Withholding Tax- Assign Numbering Group
to Numbering Class
16. Maintain Number Groups FOR Remittance challans

PATH- PATH --SPRO – IMG-Financial Accounting

Global Settings  Withholding Tax  Extended
Withholding Tax-  Postings-  India – Remittance
challan – Documet type- Maintain Number group
17. Assign Number Ranges to Number
Groups

PATH --SPRO – IMG-Financial Accounting

Global Settings  Withholding Tax  Extended
Withholding Tax-  Postings-  India –
Remittance challan – Assign Number Ranges
to Number Groups
18. Maintain Number Ranges
PATH --SPRO – IMG-Financial Accounting Global
Settings  Withholding Tax  Extended Withholding
Tax-  Postings-  India – Remittance challan - Maintain
Number Ranges

PATH --SPRO – IMG-Financial Accounting

Global Settings  Withholding Tax  Extended
Withholding Tax-  Postings-  India – Remittance
challan – Assign Number Ranges
19.Maintain Company code settings
path – LOGISTICS – GENERAL –TAX ON GOODS
MOVEMENT – INDIA- BASIC SETTING-MAINTAIN
COMPANY CODE SETTINGS
Click on New Entries
Enter company Code and Select first month as per FY
variant.Current company fy variant is from January to
December.
20. Maintain Number Groups and SAPscript
Forms
SPRO- FINANCIAL ACCOUNTING NEW-
WITH HOLDING TAX-EXTENDED WITH
HOLDING TAX-POSTING-INDIA-WITH
HOLDING TAX CERTIFICATE FOR VENDOR
& CUSTOMERS-- Maintain Number Groups
and SAPscript Forms
.CLICK ON NEW ENTRIES-
a.ENTER COCO-HERO
b.ENTER FORM AS - J_1IEWT_CERT
C.NUMBER GROUP AS - HER
21.ASSIGN NUMBER RANGE TO NUMBER
GROUP.
SPRO- FINANCIAL ACCOUNTING NEW-WITH
HOLDING TAX-EXTENDED WITH HOLDING
TAX-POSTING-INDIA-WITH HOLDING TAX
CERTIFICATE FOR VENDOR &
CUSTOMERS– ASSIGN NUMBER RANGE TO
NUMBER TO NUMBER GROUP
22.Maintain Number range Groups
SPRO- FINANCIAL ACCOUNTING NEW-WITH HOLDING TAX-
EXTENDED WITH HOLDING TAX-POSTING-INDIA-WITH HOLDING TAX
CERTIFICATE FOR VENDOR & CUSTOMERS– Maintain Number range
Groups
23.MAINTAIN COMPANY CODE SETTING-
SPRO-LOGISTIC --- GENRALS---TAX ON GOODS
MOVEMENT---INDIA---BASICS---SETTINGS---
MAINTAIN COMPANY CODE SETTINGS
24.EDIT VENDOR MASTER – T CODE –
FK02