Withholding tax rounding-off for authorities payment in the Indian version of Microsoft Dynamics AX 2012 R3

This article applies to Microsoft Dynamics AX for the Indian (in) region.

Application should have the flexibility to round off the penny difference in the tax settlement amount.

The tax rounding off functionality should be extended to India direct tax. So that during the tax settlement process the balance tax payable amount will be updated to the Authority account.

To avoid difficulty in calculation of taxable amount and to facilitate easy of payment of tax liability, the Income Tax act provides provisions of rounding off of taxable income as well final tax liability which is given under section 288B.

Currently, during withholding tax payment to tax authorities, TDS/TCS amount is not rounded off to nearest of multiple of INR.10. You have to take care of this through manual adjustment through General Journal.

As per Income Tax act section 288B, any amount payable or refundable under the provision of this act shall be rounded off to the nearest of Rs. 10. The act clearly states that any amount under this provision which includes TDS also hence the TDS amount should be rounded to the nearest of Rs. 10.

For example:

TDS amount payable to "Tax authority" INR 28736 than amount will be paid 28740.
Currently there is no rounding-off precision available in the Withholding tax authority form. During tax settlement, following entry will be generated:

Withholding tax payable Dr. 28736

Rounding off difference Dr. 04

To Withholding tax authority account 28740

After you install this hotfix, you can mark the Rounding-off payable tax check box under Withholding tax authority form (General Ledger > Setup > Withholding Tax > India > Withholding tax authorities). At the time of doing withholding tax settlement, tax amount is automatically rounded off nearest to multiple of 10 as per section 288B of Income Tax act.

NOTE In view of file validation by FVU tool, it is essential to round off TDS amount for each tax component because Tax amount in fraction will display error during FVU validation. It is advisable for you to set up rounding off precision at tax code level and in case of transaction with Non-resident Indian in foreign currency along with tax code level rounding precision, you have to apply Currency rounding also (Path - General ledger > Setup > Currency > Currencies {Under fast tab Rounding rules}).