TDS (Tax Deduction at Source) – Sales & Receivables Process
This document explains how TDS is calculated, deducted, and recorded in accounting from both the Seller’s and Purchaser’s perspective within the Aegis Software system.
1. What is TDS?
TDS (Tax Deduction at Source) is a tax deducted by the purchaser at the time of making payment to the seller.
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Seller issues a VAT bill with Buyer’s Name and PAN Number.
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Purchaser deducts applicable TDS (generally 1.5% on service sales in Nepal) before making payment.
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Seller records deducted amount as TDS Receivable (claimable during annual tax filing).
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Purchaser records the deducted amount as TDS Payable (liability to be deposited to the government).
2. TDS Calculation Example
Example Transaction
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Seller: Pokhara Grande
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Purchaser: Aegis Software Pvt. Ltd.
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Sales Amount (Excl. VAT): Rs. 500
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Discount: Rs. 50
Calculation
| Particulars | Amount (Rs.) |
|---|---|
| Subtotal (Before Discount) | 500 |
| Discount | (50) |
| Taxable Amount | 450 |
| VAT @ 13% | 58.5 |
| Grand Total | 508.5 |
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TDS Base (After Discount Value): 450
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TDS @ 1.5%: 6.75
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Payment Receivable (Net): 508.5 – 6.75 = 501.75
3. Accounting Entries (Seller’s Books)
A. Sales Entry
| Ledger | DR (Rs.) | CR (Rs.) |
|---|---|---|
| Sundry Debtors >> Aegis Software | 508.5 | |
| Revenue – Room Tariff | 450.0 | |
| VAT on Sales (13%) | 58.5 |
👉 Receivable Amount = 508.5 DR
B. TDS Deduction Entry (Journal Voucher / Own Voucher)
| Ledger | DR (Rs.) | CR (Rs.) |
|---|---|---|
| TDS Receivable >> Aegis Software | 6.75 | |
| Sundry Debtors >> Aegis Software | 6.75 |
👉 Net Receivable = 501.75 DR
4. Accounting Entries (Purchaser’s Books)
A. Purchase Entry
| Ledger | DR (Rs.) | CR (Rs.) |
|---|---|---|
| Business Promotion Expenses | 450.0 | |
| VAT on Purchase | 58.5 | |
| Sundry Creditors >> Pokhara Grande | 508.5 |
👉 Payable Amount = 508.5 CR
B. TDS Deduction Entry (Journal Voucher / Own Voucher)
| Ledger | DR (Rs.) | CR (Rs.) |
|---|---|---|
| Sundry Creditors >> Pokhara Grande | 6.75 | |
| TDS Payable >> Pokhara Grande | 6.75 |
👉 Net Payable to Seller = 501.75 CR
5. Summary of Flow
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Seller issues VAT bill → Records sales + VAT.
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Purchaser deducts TDS → Pays seller net amount.
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Seller records TDS Receivable → Claims adjustment during tax submission.
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Purchaser records TDS Payable → Deposits to government.
✅ This process ensures compliance with Nepal’s TDS regulations and maintains transparent accounting records for both parties.
Documented By - Sundar Mishra