Deduct TDS when you book or pay an expense

Q: The invoice shows paid but the supplier's statement still shows a balance.

That is the TDS amount case above: the invoice's Due amount counted the TDS, the books did not. Correct it with a journal voucher.

Q: Does the TDS report show TDS from my payment vouchers?

No. It lists the TDS booked on journal vouchers ( TDS report ).

Book an expense with TDS on a journal voucher: the screen debits the expense, credits the supplier with the net amount and credits the TDS payable ledger. Then pay the supplier the net amount and pay the TDS to the tax office. The TDS amount column on a payment or receipt against an invoice does not reliably post in this release.

Accounting TDS
5 min read
Updated October 20, 2026

For Accountant

On this page

Two places TDS appears, and which to use
Book an expense with TDS on a journal voucher
Pay the supplier and the tax office
TDS amount on a payment or receipt against an invoice
Common questions

Two places TDS appears, and which to use

Where	What it does	Use it?
Journal voucher line with TDS fields	Books the expense, the supplier's net amount and the TDS liability together, and feeds the TDS report	Yes
TDS amount column on a payment or receipt against an invoice	Lets you type a TDS amount next to the amount paid; the invoice's Due amount falls by the payment plus the TDS	Only with the check below

Set TDS up first (Set up TDS).

Book an expense with TDS on a journal voucher

Open a journal voucher
Who
Accountant
Where
Journal voucher > Add (Make adjustments with a journal voucher)
What changes
Add journal voucher opens.
Add the expense line
What changes
Choose Add. As the General ledger choose the expense ledger that has a TDS type, set Debit and the Amount. The TDS fields appear.
Needs
The expense ledger is marked for TDS (Set up TDS).
Choose the supplier
What changes
Choose the Service Supplier. The screen looks up the TDS rate from the ledger's TDS type and the supplier's type and tax type. The TDS payable ledger, the TDS amount (worked out, you cannot type it) and the Net pay after TDS fill in. Enter the supplier's Party invoice no and Party invoice date.
Needs
A matching TDS master: if none matches the TDS fields stay empty.
Save the line, then the voucher
What changes
The screen turns the line into three: the expense debited with the full amount, the supplier credited with the net amount, and the TDS payable ledger credited with the TDS amount. Save the voucher: "Journal voucher (number) saved successfully."

What the voucher changes

Area	Change
Expense	Debited by the full amount
The supplier's account	Credited by the net amount: you owe the supplier the net
TDS payable	Credited by the TDS amount: you owe the tax office
The TDS report	The TDS shows on it (TDS report)
VAT register	Only if you also switched on Show on VAT register (Make adjustments with a journal voucher)

Pay the supplier and the tax office

Pay the supplier the net amount with a payment voucher (Pay a supplier or an expense with a payment voucher). The supplier's account is credited by the journal, so pay it as you pay any supplier: choose the supplier and the amount. If you ticked Applicable for payment reference ? on the journal, the journal's amount is offered as a bill to pay against (Pay a supplier and what clears what).
Pay the TDS to the tax office with a payment voucher whose line is the TDS payable ledger: it debits the TDS payable ledger and credits your bank.

Worked example: a consultancy bill from booking to paying the tax office

ABC Consultants Ltd bills 20,000 for consultancy (VAT is left out to keep the example short). The company's setup is the one in the Set up TDS example, where the master for a limited company with VAT has a Percentage of 1.5.

Step	What you enter	What the screen or the books show
1. Journal voucher line	General ledger "Consultancy fee", Debit, Amount 20,000; Service Supplier ABC Consultants Ltd; the bill's Party invoice no and date	TDS amount 300 (20,000 × 1.5 ÷ 100), Net pay after TDS 19,700, and the TDS payable ledger fill in
2. Save the line and the voucher		Three lines: "Consultancy fee" debit 20,000; ABC Consultants Ltd credit 19,700; the TDS payable ledger credit 300
3. Pay the supplier	A payment voucher from your bank to ABC Consultants Ltd for 19,700	You owe ABC Consultants Ltd nothing
4. Pay the tax office	A payment voucher from your bank with the line Pay to the TDS payable ledger, 300	The TDS payable ledger is back to 0

At the end the expense is the full 20,000, the bank has paid out 20,000 in two parts (19,700 and 300), and the TDS report lists the 300 against ABC Consultants Ltd (TDS report).

TDS amount on a payment or receipt against an invoice

On a payment or receipt voucher against an invoice you can type a TDS amount. The screen needs a TDS payable ledger in Configuration (the Voucher tab; "Please set the TDS ledger before giving the TDS amount"), refuses a payment plus TDS above the outstanding amount, and lowers the invoice's Due amount by both (Pay a supplier or an expense with a payment voucher, Record any money received with a receipt voucher).

If your customer deducts TDS when paying you, the receipt voucher has the same TDS amount column and the same limitation. After each such receipt check the customer's statement; if it still shows the TDS amount as owing, ask your accountant to book the TDS (for example to a receivable ledger) with a journal voucher.

Common questions

The TDS amount cannot be typed on the journal.

It is worked out from the percentage. Change the amount or fix the TDS master.

The invoice shows paid but the supplier's statement still shows a balance.

That is the TDS amount case above: the invoice's Due amount counted the TDS, the books did not. Correct it with a journal voucher.

Does the TDS report show TDS from my payment vouchers?

No. It lists the TDS booked on journal vouchers (TDS report).