JAI CRM
Home Documentation Sales documents TDS and TCS

TDS and TCS

When a customer deducts tax before paying you, and what the document shows.

Some customers deduct tax before paying you. Your invoice says ₹1,00,000; ₹2,000 arrives less. That is TDS, and it is not a short payment.

Why this needs handling

Without it, every such invoice sits permanently partly unpaid, and somebody chases a customer who has paid correctly. Worse, the deducted amount is tax you have already suffered and can claim — but only if you know what it was.

On the document

FieldWhat it is
ApplicableWhether tax is being withheld on this document.
KindTDS or TCS.
SectionWhich section of the Act.
RateThe percentage.
TDS amountWorked out, not typed.
Net payableWhat the customer actually transfers.

That last figure is the useful one: it is what you should expect in the bank, so the payment matches without anybody doing arithmetic.

The sections master

Sections are set up once, each carrying the ordinary rate, the higher rate when PAN is missing — 20% in India — and a yearly threshold below which nothing is deducted.

The register

Whenever a customer deducts TDS on a payment, an entry is written to a register with the customer’s name, the section, the base, the rate and the financial year. The base is the taxable value of the invoices the payment settles, before GST, as Form 26AS states it. That register is what you hand your accountant, and what you reconcile against Form 26AS.

An example

  1. An invoice for ₹1,00,000 plus 18% GST. ₹1,18,000.
  2. The customer deducts TDS at 2% under 194C on the base: ₹2,000.
  3. Net payable shows ₹1,16,000.
  4. ₹1,16,000 arrives and is recorded. The invoice settles, with the ₹2,000 recorded as deducted, not owed.
  5. At year end the register shows every rupee deducted, by section.

Why the total and the receipt disagree

This is the part that confuses people, so it is worth being slow about.

When a customer deducts TDS, they are not short-paying you. They are paying part of your money to the income tax department on your behalf, against your PAN. You get credit for it when you file.

LineExample
Invoice total₹1,00,000
TDS deducted at 10%− ₹10,000
Net payable — what actually reaches your bank₹90,000

So the document shows Total, then TDS, then Net payable. Your receivable is settled by ₹1,00,000 even though ₹90,000 arrived, because the other ₹10,000 is sitting with the department in your name.

If you treat the ₹10,000 as unpaid, you will chase a customer who has paid you in full. That is the single commonest mistake with TDS, and it is why the number is shown on the document rather than left for somebody to work out.

The sections

The section tells the department what kind of payment it was. The common ones on a sales document:

SectionUsually
194CContract work.
194JProfessional or technical fees.
194IRent.
192Salary.

Outside India the same field takes a free label, so a withholding tax with another name still works.

TCS is the other direction

TDS is deducted by your customer from what they owe you. TCS is collected by you from your customer, on top of the invoice. One reduces what arrives; the other increases it, and leaves you owing the department.

The Payments received screen carries a TDS deducted by clients tile, so the running total of what your customers have withheld is one number rather than a reconciliation exercise.

Where to go next

Something missing or wrong here? Tell us. A question that needed asking usually means a page that needed writing.