TDS to be deducted on interest accrual of Fixed Deposit

[Former Member]

Hello,

We are implementing Fixed Deposit Accounting in Treasury for our client. There are 4 FD schemes where interest is paid on Maturity and the term of these schemes are 25 months, 39 months and 60 months.

The current practice being followed by business is to post accrual entry for Interest only once a year i.e. during year end closing but payment is on Maturity only. They also make an appropriate payment of TDS to the IT authorities at the time of accrual of interest (at each year end) based on the amount of interest accrued and not the amount of interest paid. Additionally, they also issue a TDS certificate to the FD holder for each Financial Year.

How do you think we can deal with this in SAP. TDS is only deductible at the time of payment of interest to the Customer and not on accrual as the customer account in SAP, remains unaffected during accrual

(entry on accrual is -

Interest Exp Dr

To Prov for Interest Cr)

Request your assistance to solve this critical issue.

Thanks,

Murtuza

+91 99232 05169.

[Former Member]

HI,

You can get the TDS flow for each Nominal interest flow in Fixed Deposit deal. Using configuration of derived flows the corresponding TDS flow can be generated duly assigned to source flow with percentage etc and posting in to accounts as per customer requirement.

For paying the year end TDS against accrued interest, you can configure the TDS flow type relevant for accrual and by executing TPM44, can get accrual entries for Interest and TDS seperately. If the TDS payment on year end is against actual payment, then probably you use accrual with difference procedure for TDS flows, so that for each year the amount will be recogonized for that particular FY only.

Regards

Prasad AV

[Former Member]

Prasad,

I cannot Thank You enough for the solution provided. I have been able to view the cash flow appropriately now. Have not yet tested the accruals at year end but will do that shortly and post my reply again.

But Thank You very much for the clarity.

Regards,

Murtuza.

+91 99232 05169.

[Former Member]

Hi Prasad,

The derived flows procedure was very helpful for building a formula for Brokerage Commission on FD. However, for TDS, the impact is not there on Customer Account. In that case, the TDS codes applied in the Customer Master are of no use. TDS certificate printing will also be difficult.

Request you to share your views.

Thanks again.

Regards,

Murtuza

+91 99232 05169

[Former Member]

Hi,

For the TDS flow what is your expected accouning entry, it is possible to post the TDS accrued flows to customer account and then clear manually with bank. Try to set the account determination for accrual with Customer posting and check postings are allowed or not.

Alternatively, for acheving this, you can use BAdi (TPM_ACCIF_TRAC~ACCIT_EXIT) where you can overwrite the customized account determination set with GL account.

Regards

Prasad AV

[Former Member]

Hi Prasad,

Thanks for your comments.

Under SIMPLE INTEREST Calculation Method, TDS payments are made every 6 months on 31st March and 30th September. At that time the entry is

Interest Expense A/c Dr

To FD Holder's A/c

&

FD Holder's A/c Dr

To TDS on 194 A

However, under CUMULATIVE INTEREST Calculation Method, interest accrual entry is made only once a year i.e on 31st March. At that time, the entry is

Interest Expense A/c Dr

To FD liability A/c

(being interest capitalized / accumulated to FD Liability account)

Since the FD Holder's A/c is not picked by the system, TDS deduction at the time of accrual is not happening.

The client's business process is that every year on 31st March the interest is accrued, TDS deducted and net amount capitalized to the Principle amount. TDS is then paid to the Government and the TDS certificate is also issued to the FD Holder.

Hope this clarifies my issue further.

Thanks,

Murtuza.

[rohankamat1985]

Hi Prasad,

Since this thread is still open, I am putting up my query here.

You have suggested to define TDS flow relevant to accrual. But how will the system come to know that TDS accrual flow should calculate at 10% of the accrued interest?

Regards,

Rohan