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Pay a vendor

Allocating the money, settling the TDS the bill booked, and why the vendor gets less than the bill.

The last step of the chain, and the one with the most arithmetic in it.

Recording one

  1. Go to Procurement → Payments made, or press Record a payment on the bill.
  2. Pick the vendor.
  3. Enter the amount that left your account and the date.
  4. Choose the bank account it went from.
  5. Allocate it against the bills it settles.
  6. Add the reference — the NEFT or UTR number.

Allocate every payment. An unallocated payment is money that left your account against nothing, and it makes both the vendor’s balance and your bank reconciliation wrong at the same time. The payments list carries an unallocated total precisely so you can see when this has happened.

One payment, several bills

Normal, and supported. Pay four bills with one transfer and allocate the amount across all four. Each bill moves to partially paid or paid on its own.

The TDS was booked on the bill

TDS is due when you credit the supplier or pay them, whichever comes first, and entering the bill is the credit. So a bill from a vendor marked TDS applicable books its TDS into the TDS register the moment it is opened, on its taxable value: the GST shown on the bill is not part of what TDS is worked out on.

Paying the bill then settles that same TDS. The payment window asks for the cash due, says how much TDS the bill holds, and tells you when the amount clears it.

LineExample
Bill: ₹1,00,000 plus 18% GST₹1,18,000
TDS at 10% under 194J, on ₹1,00,000− ₹10,000
Paid to the vendor₹1,08,000
Owed to the department₹10,000

The bill is settled in full at ₹1,18,000. Only ₹1,08,000 left your bank. The ₹10,000 is yours to deposit; it went into the register when the bill was entered, against the right quarter and financial year, which is what your TDS return is assembled from. Paying does not add a second entry.

Part payments settle the TDS in proportion, and the last payment settles whatever is left, to the paisa. Money paid ahead on a purchase order, before any bill exists, has its TDS deducted at the payment instead, on the taxable part of the order, because that payment is the first moment there is one.

No PAN means a higher rate

If the vendor has no PAN on file, the bill is deducted at the higher rate the Act requires, over any lower rate set on the vendor, and the TDS entry says so:

Deducted at the higher rate because no PAN is on file for this vendor

The calculation is right, the note explains it, and the vendor is still going to ring you. Collect the PAN first.

Turning it off

Where TDS genuinely does not apply to one bill, such as a reimbursement, untick You deduct tax at source (TDS) on that bill. Do it on the bill, not by unsetting it on the vendor, or the next bill is wrong too. For a vendor with a lower-deduction certificate, set the certificate rate on the vendor.

Before you release money

  1. The bank account has been verified. Not “is filled in” — verified.
  2. The bill matches the order.
  3. The vendor is not blocked. The system checks, but knowing why is better than being stopped.
  4. The TDS section is the right one for what you bought.

Where to go next

Next in vendors Block a vendor → Bank details, and checking them →

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