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In todays scenarios there are lots of challenge in this Tax area specific to withholding tax calculation in SAP Treasury, if you search the blog there are many articles present on this topic, where as an end to end customization with user flow with multiple scenario is very rare to find.

Withholding tax calculation and posting is a necessary and a legal requirement in India. When dealing with money market instruments like fixed deposit. So how does we calculate and post in SAP Treasury Module, this process only explained with related to Treasury & Risk Management module.


You have a fixed deposit with a Bank (Business Partner) where you are receiving the interest based on the condition. More on Maturity.

So, you have the below Flows for a Fixed Deposit

  1. Principal Flow/ Position flow (-)

  2. Repayment Flow / Maturity (+)

  3. Interest Income (+)

In India, Bank generally deduct 10 percent from the interest amount if the amount exceeds INR 5000. So ultimately our Accounting entries should post with WTH Tax code and an automatic deduction of tax amount is expected.

Let’s discuss, how can we achieve the same more on it on configuration.


There are two ways to calculate

  1. Derived Flows

  2. Direct Calculation in Treasury Module based on Tax Code

        1.Derived Flows:

This method is suitable if the calculation needs to appear in Transaction Manager Cash Flow Tab. Where we used to configure a derived flow and the same will appear in cash flow tab and can be posted in TBB1 – Accounting posting.

However, there are some demerits on this, and this is not suitable for India.


  1. Tax code will not be captured

  2. Single entry by adjusting the tax flow with Nominal Interest will not be posted

  3. Bank reconciliation error as the bank account will hit with two flows.

  4. Proper tax reposting will not happen.

So, the best way to do on Direct calculation in Treasury module. We will discuss the Direct Calculation method in this blog briefly.
        2. Direct Calculation in Treasury Module based on Tax Code

The basic requirement for this in Extended with holding tax set up in FI Module.  For this set up please refer to the below link

once the extended withholding tax set up is done, let focus on Treasury set up. I will not discuss here the standard setting for Fixed deposit instrument. I will focus more on additional configuration required for this WHT calculation.
Customization steps

1. Create a Flow type for Withholding tax.

Apart the from the standard flow types, we need to create one more flow type for Withholding tax. For posting in Into Accounting a flow is a must.

2. Assign flow type to Update type

In this step, we create an update type and assign the update type as below. We assign Flow type to Update type, which is a technical step for posting. Please mark the update type as relevant for posting in appropriate node.

3. Create Account Symbol

Account symbol need to be created for posting to subledger. Please remember, to capture the tax code, Transaction manager postings need be into subledger instead of Accounting posting. In standard SAP, we generally post to GL account.

4.Create posting specification

Posting specification is relevant for Debit and credit leg of and accounting entry. Here I have created the customer posting specification as follows.

5.Assign Update type to Posting specification

Update type relevant for the above configuration as follows. Please remember to tick on Payment transaction as withholding tax can only be calculated if this is ticked.

6.Withholding tax Base amount Configuration

Remember we have a condition if the amount exceed INR 5000/- then only the Withholding tax will be calculated. For that purpose, we must set the base amount.


Under this node we have define the base amount for calculation in INR 5000/- for both tax type and Tax code level.

Front-end User Setting

1. Maintain Business Partner master data (BP)

The prerequisite to activate the withholding tax is maintain the business partner in Counterparty role and the customer must be assigned. Then only the Withholding tax will be activated.

2. Maintain the Payment Details in Contract ( FTR_EDIT)

Below is the detailed view of the 1200 Flow type payment details

3. Maintain the TRXV_WT_ASSIGN table. (SM30)

In this table we need to maintain the tax code and tax type, base update type on which tax will be calculated and the tax update along with Accounting code & product type etc.

Please note for WHT, AT2010 table maintenance is not required.


Post the Flows 

Before posting the flow, please check the cash flow.

Now let’s post the flow in TBB1.

You can see the WHT receivable entries got created automatically as we have maintained the above two table. The amount also got calculated according to tax code.

Let’s remove the test run and post.

I have just highlighted the WHT flow only as the principal flows are posted as usual.

Accounting View

You can see both the update (Nominal Interest and Withholding tax) types got clubbed and posted in a single entry. You can check the WITH_ITEM table for the tax effect,

Conclusion & Business Benefits:

This way calculation is quite easy and based on the accounting rules, where not much clearing task required and the entries are posted by rule, so manual posting headache is not there. The withholding tax captured correctly with minimal effort and the tax reporting will be proper for business.


*The same Scenario will work for WHT Payable too, No need to create any further update type/ posting specification.