Section 206C (1H) for TCS: Setup and Transaction in NAV 2016 (IN)| Out of the Box functionality

Co-Author: Mr. Dhaval Bhatt.

Overview of Section 206C (1H) for TCS

Updates in NAV for handling new TCS rule (206C-1H)

Under Cumulative update 59 which is released in September 2020, few changes are found in relation to the concerned TCS rule. But, no official notification or documentation has been provided by Microsoft on the same. So, you need to test to identify how exactly the things are working out.

Changes in Setup

A new TCS type i.e. 1H added in the available list of TCS Type for mapping in TCS Nature of Collection setup.

Two new fields added in TCS Setup: Non PAN TCS % & Calc. Over & Above Threshold.

Non PAN TCS %: This field contains the TCS Percentage which would be applicable if the PAN No. is blank on the Customer Card.

Calc. Over & Above Threshold: Select this checkbox to calculate the TCS on the amount in excess of the TCS Threshold Amount only.

Now, let's move further and start setting up for the new rule:

TCS Setup for enabling 206C (1H) in NAV

TCS Nature of Collection

Create a new TCS Nature of collection for 1H as shown below.

TCS Setup

The ideal setup keeping in mind the below points would be as per the shown screenshot.

1. TCS shall be collected at the rate of 0.1% of the amount in excess of Rs. 50 Lakhs.

2. If the buyer does not have PAN no., then the rate shall be 1 %.

3. TCS rate has been reduced to 0.075% for the period - 1st October 2020 to 31st March 2021.

Transaction in NAV with new (1H) TCS Setup

So, let's create a Sales Invoice for 40 Lakh in September 2020. Then if we create a Sales Invoice for 11 Lakh in October 2020, 0.075% TCS should be calculated on

1 Lakh i.e. the amount in excess of 50 Lakh (as per rule)

So, I have posted a Sales Invoice in Sep 2020 as shown below.

So, now let's create a Sales Invoice in Oct 2020 for 11 Lakh.

I have put the amount as 11,00,000.00 and selected the TCS Nature of Collection as 1H.

Now, let's do the Preview Posting to check the TCS impact i.e. whether TCS is getting calculated or not and on what amount.

You can see that the TCS is calculated correctly on the amount exceeding 50 Lakh only.

So, this is all we have got with CU59 in NAV 2016.

I must say that Microsoft has provided an incomplete update. To handle Section 206C (1H) in NAV we have to customize the system.

In the next section, I am explaining the shortcomings in this update for the new TCS rule.

Shortcomings in the CU59 update for TCS (206C -1H)

1. As per section 206C (1H) TCS should be collected at the time of receipt of payment from the customer. But, in NAV we cannot do this. We can only Calculate and Post TCS at the time of Invoice (not possible through Bank Receipt Voucher/Payment Journal/Cash Receipt Journal).

2. TCS threshold limit check is PAN based. In other words, If multiple customers have the same PAN, then the accumulated transaction amount of both customers will be taken into account to compare with the threshold limit to determine the eligibility of transaction for TCS calculation. Currently, NAV is not checking this condition. It is going on Customer Code basis.

3. Currently, NAV is adding-up the Invoice Amount in the TCS Entry table to check the TCS Threshold Amount. So, we need to generate the TCS Entries for the period of April 2020 to Sep 2020 for our clients using NAV who are eligible for 206C (1H).

Microsoft has not provided any Batch Job for generating TCS Entries. So, partners have to make sure that all their eligible clients have the TCS Entries (through Batch Job) created for the mentioned period (Apr 2020 - Sep 2020) in their database.

Hope it helps! Cheers!