Indian Institute of Computer Accountants

Student Hand Book

On Tally.ERP

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 Indian Institute of Computer Accountants

Advantage of Accounting Package: In earlier days maximum

organization maintain their accounts manually. But the present scenario is
totally different. In today’s competitive world maximum organization use
Computerized Accounting Package to maintain their daily accounts. So we
can say that Manual Accounting replaced by Computerized Accounting, So
Computerized Accounting have many advantages. Here we discuss some
of the main advantage of Computerized Accounting:

1. Auto Reports: In Accounting Package we not need to create any types

of reports. All types of reports are automatically generated in
Accounting Package in including Final Accounts.
2. Revenue expanses of the organization will decrease
3. Backup Facility
4. Speed
5. Accuracy
6. Storage Capacity etc.

Why Tally: Tally is a global accounting package. In India so many

readymade and tailor-made accounting package available but out of those
package Tally is most popular. Almost everyone knows about tally, if we
want to find the reason behind that the mention point has come:

1. Complete Accounting
Package 2. Most User Friendly
Software
3. Update Version regularly.

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History of Tally Solutions Pvt Ltd

Tally Solutions Pvt Ltd formerly called Patronics Pvt Ltd. Based in Bangalore
was started as a simple reason, and software development organization
the absence of readily available accounting package made the company
create for their own business requirements thus commenced the
development work on an accounting package in BASIC in the year 1986.
The package was then the account.

Leadership

Late Mr. S. S. Goenka was the founding chairperson of Tally Solutions Private
Limited.
Bharat Goenka is the Co-Founder & Managing Director of Tally Solutions
Private Limited. He was recently awarded the Lifetime Achievement Award
by NASSCOM (National Association of Software & Service Companies).

Glance over the various versions of tally

Tally 4.5:-
Its MS-DOS support financial accounting system. It takes care of
accounting activities only such as Ledgers Classification Vouchers Entry.
Simple financial repots and Bill wise analysis of debtors and creditors in
the business.

Tally 5.0:-
It’s an up grated version to tally 4.5 and it works in windows operating
system Inventory modules is introduced in this version, which involves
detailed inventory, structure invoicing and integrating accounting and
Inventory records.

Tally 5.4:-
It’s an improved module over the version 5.0 where it is capable of
converting earlier data formats in to the current data format. This is possible
though Import of Data Facility.

Tally 6.3:-
It’s an extended enterprise system where by it interacts with other system
through ODBC (Open Data Base Connectivity you and e-mail upload your
financial records form tally.

Tally 7.2:-
It’s an integrated enterprise system VAT, TDS & TCS and Service Tax modules
is introduced in this version.
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Tally 8.1:-
It’s multi language support software. It supports 10 Languages (Includes is
introduced in this version.)

Tally 9.0:-
It’s an improved model over the version 8.1. It supports 13 Languages
(Includes Foreign Languages). Payroll, POS modules is introduced in this
version.

Tally.ERP 9:-
version Tally.ERP9 is an dynamic program that can handle almost all your
statutory requirements like, VAT, TDS, TCS, Service Tax, Pay Roll, P. F., E. S.
I. C., Manufacturing Excise, Dealer Excise, FBT (Now redundant due to
govt. strategy but still tally can give reports for last financial year),
Remote, Tax Audit, Statutory Audit, Vat Audit for auditors or chartered
accountants few upcoming features include reports on SMS, Remote Edit,
Improvised Service Tax & Many more

Tally.ERP 9 Series A Release 3.7 and Stat 187 is the latest offering of
the Tally software series.

The Highlights in Tally.ERP 9 Release 3.7:

 Reverse Charge support for Service Tax

 New Report Excise Stock CENVAT Register for Excise Dealers
 A new head – In Current Account is provided under Balances with Bank
in Schedule VI Balance Sheet.

Salient Features of Tally.ERP 9

No accounting codes: Tally.ERP 9 pioneered the accounting codes

concept. Tally.ERP 9 users have the freedom to allocate meaningful names
in plain English to their data items in the system.

Integrated/ Non-integrated accounting and inventory: With Tally.ERP

9, the user is able to choose between accounting and accounting with
inventory. If accounting with inventory is opted for, the user can choose
whether it should be integrated or not.

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Speed: Tally.ERP 9 provides the capability to generate instant and

accurate reports, which assists the management to take timely and correct
decisions for the overall productivity and growth of the company.

Power: Tally.ERP 9 allows the user to maintain multiple companies and

with unlimited levels of classification & grouping capabilities. It also allows
drill down facility from report level to transaction level.

Concurrent multi-lingual capability: Tally.ERP 9 offers you the

exclusive capability of maintaining your accounts in any Indian language,
viewing them in another language and printing them in yet another Indian
language.

Versatility: Tally.ERP 9 is suitable for a range of organisations, from small

grocery stores to large corporations with international locations and
operations.

Online Help: The Tally.ERP 9 Online Help (Alt+H) provides instant assistance
on basic and advanced features or any other relevant topics of Tally.ERP 9.

Tally.NET: is an enabling framework which establishes a connection through

which the remote user can access the Client's data without copying /
transferring the data.

Remote Access: Tally.ERP 9 provides remote capabilities to access the data

from anywhere and anytime.

Control Centre: works as an interface between the user and Tally.ERP 9

installed at different sites and enables the user to centrally configure and
administer Site/User belonging to an account.

Support Centre: allows a user to directly post his support queries on the
functional and technical aspects of the Product.

Auditor's Edition: Tally.ERP 9 offers a special Auditors' Edition of Tally.ERP 9,

which provides auditing and compliance capabilities exclusively for Chartered
Accountants.

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Maintain Accounts in Tally: We may divide the process of maintaining

accounts in Tally package in four parts:

1. Company Creation

2. Master Creation

3. Voucher Entry

4. Reports

Company Creation:

In company creation basically we create a company and give the

necessary details of the organization for which we want to maintain
accounts in Tally. Whenever we create any company in Tally a folder is
created in C:\Tally.ERP9\Data by default in Windows XP OS, if we want than
we have to change the folder location as per our choice.

Master Creation:

After company creation the next stem is master creation. It’s the one time
information for the company. There are there types of master available in
Tally

1. Accounting Master
a. Ledger Creation
b. Group/Sub Group Creation
c. Cost Centre and Category creation
d. Budget
e. Scenario
f. Voucher Class creation
2. Inventory Master

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a. Stock Creation
b. Stock Group Creation
c. Stock Category Creation
d. UOM
e. Godowns Creation
f. Price List Creation
g. Voucher Types
h. Re-order Level
3. Payroll Master
a. Employee Creation
b. Employee Group Creation
c. Employee category creation
d. Units (Work)
e. Pay Head Creation
f. Salary Details
g. Income Tax Details
h. Voucher Types
i. Attendance/Production Types

Ledgers:

A Ledger is the actual account head to which you identify a transaction

and must be used in all Accounting Vouchers. Without ledger we cannot
record any transactions. In tally by default two ledgers already created at
the time of company creation, so we need tot to create those two ledgers.

Cash in Hand

Profit and loss A/c

Ledger is one time information for the company. Suppose we want to pay
office rent per month, we have to pass transition per month but we create
ledger only first time.

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We can create ledger in two ways Single Ledger and Multi Ledger.

Groups & Sub Groups:

Groups are collection of Ledgers of the same nature. Account Groups are
maintained to determine the hierarchy of Ledger Accounts which is helpful
in determining and presenting meaningful and compliant reports. There
are 28 pre-defined Groups in Tally.ERP 9, out of which 15 are Primary
Groups and 13 are Sub Groups. The user can create any number of
Primary Groups and Sub Groups which are again grouped under a Primary
Group/Sub Group. Suppose we want to create Capital Ledger then we have
to select Capital group for that ledger. Many times we want some other
groups or sub groups which are not available in default list then we can
create new groups or For example we want to create a new subgroup O/S
Expanse for O/S salary, O/S Rent etc.

Cost Centre and Cost Category:

Cost Categories are useful for organizations that require allocation of

Revenue and NonRevenue Items to parallel sets of Cost Centres. Cost
categories facilitate third dimensional reporting of Expenditure and
revenue. Some of the examples of Cost Categories can be Region-wise or
geography-wise, Grade-wise, Department-wise and so on. Normally when
any expense/income comes in accounts, it is allocated in a specific
expenses/income head. Say for instance, an advertisement expense is
paid from SBI of Rs.21000. The entry is simple: Entry:

Advertisement Expenses ……………………………………………Dr 21000

To, SBI ………………………………………………… 21000

But it is also given that the expense is actually divided in a number of Ad-
media (TV Ad15000, Paper Ad4500 and Local Ad 1500).

In Tally we can also create Pre-define cost Centre if percentage of specific

expanse/income had defined. Suppose we have to pay commission to Mr.
X (34%), Mr. Y (26%) and Mr. Z (40%) of total commission. We can pass
this entry through cost Centre and category. But at the time of passing the
entry we have to calculate the percentage and if we maintain this through
pre define cost Centre then it will automatically divided as per percentage
defined.

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Voucher Entry:

After creating voucher we pass transition in different voucher in Tally.

Some voucher are already available in tally those vouchers are pre-define
voucher and in tally and sometimes we create voucher classes to utilized
some addition feather based on predefine voucher as per our needs.
Different types of predefine vouchers in tally:

Type of Voucher Short cut Use of Voucher

Key
Contra Voucher F4 Cash Bank related transition pass from this
voucher.
Journal Voucher F7 Non Cash Bank related entries pass from
this voucher.
Payment Voucher F5 Payment voucher is used to account all the
payments made by the company by way
of Cash/Bank.
Receipt Voucher F6 Any money received from debtors against
sales Invoices or on Account and for all
transactions where money is received are
accounted or entered into Tally.ERP 9 using
the Receipt Voucher.
Sales Voucher F8 Sales Voucher is used to record the Sales
transactions of the company. You can pass
an entry using the Voucher mode or the
Invoice mode where the calculations can
be automated and the transactions can be
fed into the system easily.
Purchase Voucher F9 Purchase voucher is used to record the
Purchase transactions of the company. The
entry can be passed using the Voucher
mode or the Invoice mode where the
calculations can be automated and the
user can experience the ease of feeding
the
Type of Voucher Short cut Use of Voucher
Key
Transactions into the system.

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Debit Note Ctrl+F9 Debit Note is a document issued to a

party stating that you are debiting their
Account in your Books of Accounts for the
stated reason or vise versa. It is
commonly used in case of Purchase
Returns, Escalation/De-escalation in price,
any other expenses incurred by you on
behalf of the party etc.
Credit Note Ctrl+F8 Credit Note is a document issued to a
party stating that you are crediting their
Account in your Books of Accounts for the
stated reason or vise versa. It is
commonly used in case of Sales Returns,
Escalation/De-escalation in price etc.
Purchase Order Alt+F4 When the order is placed with the
suppliers for the supply of goods, the
Items, quantities, date of receipt etc.,
details are given with the Purchase Order
Number. Later, when these goods are
received, the Purchase Order is tracked
for the Order Details either in the receipt
note or in the purchase Invoice.
Sales Order Alt+F5 When the order is received from a
customer for goods to be supplied, the
Items, quantities, date of delivery, etc.,
details are given with Sales Order Number.
Later when these goods are delivered, this
Sales Order is tracked for the order Details
either in the delivery note or in the sales
invoice.
Receipt Note Alt+F9 This voucher type is used for recording
Voucher goods received from the supplier.

Rejection In Ctrl+F6 A Rejections In Voucher is used to record

goods that are rejected and returned by
the customer.
Delivery Note Alt+F8 The Delivery Note Voucher is used for
recording goods delivered to a customer.
Rejection Out Alt+F6 The Rejections Out Voucher records
goods that are rejected and returned to a
supplier.

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Job Work Out Alt+J This voucher allows the principal company
Order to raise Job Orders on Job Worker.
Job Work In Order Alt+W This voucher allows the Job Worker to
raise receipt of Job Order from the
Principal Company.
Material Out Ctrl+J The Material Out Voucher is used to
record the material transfer out.
Material In Ctrl+W The Material In Voucher is used to record
the
Type of Voucher Short cut Use of Voucher
Key
material transfer in.
Stock Journal Alt+F7 Stock Journal is a Journal in which all
types of Stock Adjustments are entered.
Physical Stock Alt+F10 Physical Stock Voucher is used for
Voucher recording the actual stock which is verified
or counted. It could happen that the Book
Stocks and the Physical Stock do not
match. It is not unusual that the company
finds a discrepancy between actual stock
and computer stock figure. Physical
vouchers will be useful for recording
purposes only if you have configured
inventory vouchers to ignore physical
stock differences. If you have configured
the vouchers so that physical stock
difference is not ignored, then all
transactions subsequent to the physical
stock voucher will use the balance as
mentioned in that voucher.
Memorandum Ctrl+F10 This is a non-accounting voucher and the
Voucher entries made using memo voucher will not
affect your accounts. In other words,
Tally.ERP 9 does not post these entries to
ledgers, but stores them in a separate
Memorandum Register. You can alter and
convert a Memo Voucher into a regular
voucher when you decide to bring the
entry into your books.

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Reversing Journal F10 Reversing Journals are special journals

that are automatically reversed after a
specified date. They exist only till that
date and are effective only when they are
included in reports. These are used in
interim reporting in the course of the
financial year where accruals are to be
reported. These accruals are usually short
term and are cleared in the subsequent
period. However, to get a proper
perspective, decision makers require the
reports with full impact of all aspects and
transactions.
Optional Voucher Ctrl+L Unlike a Memo voucher, this is not a
separate voucher type. You can mark an
existing voucher (for example, a payment
voucher or a receipt voucher) as Optional.
Press CTRL + L or click on Optional from
the Button Bar. This button toggles
between Regular and Optional. By marking
a voucher Optional, the voucher does not
get posted anywhere but remains in the
Optional Voucher Register.
Type of Voucher Short cut Use of Voucher
Key
Post Dated Ctrl+T While entering vouchers, you can mark
Voucher them as post dated, as a result these
vouchers are not updated in the ledgers
till the date specified in the voucher. This
is useful for entering transactions that
take place on a regular basis. For example,
if you issue post dated Cheques towards
payment of installments, you can set up
the payments in advance, and Tally.ERP 9
will only update them in the ledgers on the
due date. Mark vouchers Post
Dated by using CTRL + T or click on the
button Post dated from the Button Bar.
This button toggles between Current and
Post Dated.

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Customize predefine vouchers:

Voucher class is one of the powerful feature in tally for automate

accounting allocations during Invoice entry. It is just like a template that
holds some predefined settings regarding different voucher types and you
can use that setting again and again as per your requirement. This is very
much useful in Sales invoices where you can define the billing terms, the
necessary groups, ledgers associated with that category of transactions
under the voucher class once and at the time of passing the invoice
whenever you call the class all predefined settings will automatically
appear, you need not enter the billing terms, and other things defined
under that class. This facilitates you the faster and accurate entry. Other
than sales we can use it in debit note/credit note voucher for interest
calculation, payment voucher for paid through any specific bank and many
more.

Scenario Management: Scenario Management is a management tool

through which we analysis various types of accounting and inventory
related information and its helps us to make decision in the favor of our
business. In Tally we have Accounting or Conventional and Non-Accounting
or Unconventional vouchers. Conventional transactions have the direct
effects on books of accounts and Unconventional vouchers have no effect
on books of accounts. So we pass transitions as per our requirements.
Suppose company thinks to make advertisement expanse ` 75000 but it’s
not approve from higher management. So in this situation we can pass this
entry in non accounting voucher and it’s not affected our books of
accounts. But we want a comparisons means it’s effects and without
effects in report. So we have to create Scenario here and view the required
reports.

How to create Scenario?

Step 1: Enable option from Company Fetchers (F11-F1).
Step 2: Create Scenario from Master Creation.
Step 3: Pass Non Accounting Vouchers.
Step 4: See report.

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Budget: Budget is very necessary for every accounting activities. Budget

is basically made for future events on the basis of current activities. This is
assumption based. Companies are making budget on its expenses mainly.
In Tally we can also make budgets on the basis of particular ledger, group
and cost center. Budget period is most important to get the proper
variance Report.

Example: Suppose your company makes the following plan for budget

Budget for Marketing Expenses

Budget Period Ledger Name Type of Budget Cost Centre Budget
Name amount
1-1-13 to 31- Advertisement On net Pantene Brand 36000
3-13 Expenses Transaction
Sunsilk Brand 40000

Calculation part on the above structure

January February March

Panten 12400 (36000/90*31) 11200 12400
e (36000/90*28) (36000/90*31)
Sunsil 13777.78 12444.44 13777.78
k (40000/90*31) (40000/90*28) (40000/90*31)

How to create Budget?

Step 1: Enable option from Company Fetchers (F11-F1).
Step 2: Create Budget from Master Creation.
Step 3: Pass required Vouchers.
Step 4: See Budget Variance report.

Reports in Tally:

After create a company we create master then pass entries in Tally. But
after that we need various kinds of reports for know the different kind

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business activities. All reports are automatically generated in tally; a user

can see reports as per requirements. For example, we can see Balance
Sheet, Profit & Loss A/c, Trail Balance, Ageing wise analysis, Ledger details,
Cost Centre Details etc. Tally supports multi-language so if needed we
maintain accounts in English language, view reports in Hindi Language &
want printout of invoice in Bengali language.

Year Ending:

Year ending is the date when accounts are to be closed for

an accounting period. When a business is started, it is
assumed that the business will not be dissolved in the
near future. Profit and loss Account and Balance sheet are
drawn up on the assumption that business will continue
functioning in the foreseeable future. An accounting system provides a
continuous record of the performance of the business throughout its
existence. To maintain the conformity from period to period it is necessary
that the closing balances of the assets and liabilities at the end of an
accounting period should automatically become the opening balances of
the subsequent period. Actually company transfers the closing ledger
balances of all assets and liabilities along with the stock to the next
financial period. Whenever you press Alt+ F2, you will be given the
following screen:

We can change period whenever we need to view the reports for a particular
duration without splitting the company into multiple time spans.

Company Features & Company Configuration:

Different features of a company can be selected or modified by using the

F11: Features button. Company Features is specific to the current
company only. Therefore, each company may have different active
features.

Configuration can be selected or modified by using F12: Configure

button. Configuration options, on the other hand, affect all companies
maintained in the same Tally.ERP 9 directory and setting the configuration
for one company will affect the configuration of other companies in that
particular data directory.
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Tally Audit Features:

Tally is available as multi user package. So that one company can be used
by more than one user with different privilege. All users are maintained by
administrator. Every user is having his or her own login name and
password. Administrator has to set all users login name and password.

According to their work nature access are given to them and rectify their
works by administrator if needed.

Example: Alfa Distributers Pvt. Ltd. has two users (Ayush & Shweta) in data
entry level. They are doing accounting part only, such as ledger creation,
alteration, passing voucher entry, displaying report of Profit and Loss
Account, Balance sheet etc.

Tally Vault:

Tally vault is for security of company database. Vault password hides the
Company name. After giving tally vault password, company’s name will
come in asterisk (**********) mark. Company will be signified by its initial
number (Folder number).

This password can be given at the time of company creation or later from
Company Info (Alt+F3) menu. New tally vault password always makes a new
folder with new initial.

Merge Company or Group Company:

The books of Account of different companies belonging to the same

management or owners are required to be consolidated to present the
financial position of the group of companies as a whole. This is mandatory
in many developed countries and currently shareholders would rather
know the performance of the group as a whole and not the performance of
individual constituent companies.

Tally.ERP 9 simplifies the task of consolidation of accounts. You can

consolidate the accounts of any number of companies as well as keep them
separate.

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Splitting Company Data:

The life span of a business unit should be segregated in to equal parts. A

profit and loss account and a balance sheet should be prepared at regular
intervals. For the purpose of convenient comparison of profits and losses, it
is necessary that the period should be equal. For a number of reasons the
longest accounting period is generally one year. It goes without saying
entry of data can be made in tally for any number of years. But it is
necessary to split the period according to financial year. Tally is flexible
enough to maintain period less than accounting period. You can start
financial period from any day of the year and it supports data entry for any
number of years. This provides us tremendous benefits. But presence of
old data in causes greater overheads on the system. If you split a
company new companies are generated with the respective split periods
and the full data of the company is retained in the original Company.
Before split be sure:
There is no purchase or sale bill to come. You can check the profit and loss
A/c and Balance sheet to confirm it.
Confirm that the latest Back Up exists or not.

Tax Entries Guidelines:

Earlier we discusses that tally is a complete accounting software. In

tally we can maintain TDS, VAT, CST, Service Tax, and Central Excise. For
handle this taxation portion we have to follow some common Steps in
Tally:

Step 1: Activate required options from company fetchers F11 F3

Step 2: Create required masters and tag required option
Step 3: Pass required entries
Step 4: See reports and generate forms.

Service Tax quick view:

 Service Tax is a Tax charged on Services provided by a person

to another person. The person who provides the Services is
called ―Service Provider‖ and the other person is called
―Service Receiver‖ or ―Consumer‖.

 Service Tax is a source of revenue for government in the form

of indirect tax imposed on specified services called "taxable
services".
 Normally Service Tax is payable by the provider of Service to
the Govt. of India. However, the Service Provider can collect

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this Service Tax from the Consumer of Service and deposit the
same to the Govt. However in certain notified cases, it is
payable by such other person (normally a service recipient) as
may be specified. It is also known as ―Reverse Charge
Mechanism‖ of Service Tax. Further in certain specified cases,
the Central Government may provide that Service Tax shall be
payable partly by Service recipient and partly by service
provider. This is known as ―Partial Reverse Charge
Mechanism‖.
 Service Tax was first brought into force with effect from 1 July
1994. Service tax was first imposed on services of telephones,
non life insurance & stock brokers @ 5%.Now in
comprehensive approach, all services are taxable & a negative
list is specified for services, which are not taxable.
 There is no separate Act for taxing the services. It is governed
by chapter V of finance Act 1994. It is administered by central
board of excise & customs.
 It is extended to the whole of India except the services
provided in state of Jammu & Kashmir.
 There is a uniform rate of tax on all services. Currently, it is
12.36 %( i.e., 12% service tax + 2% EC + 1% SHEC). However
in certain cases service tax is levied in different manner.
 W.E.F. – 01/07/2012, India has shifted from selective approach
to comprehensive approach and hence all the services will be
taxable unless they are covered by the any of entities in the –
A. Negative List
B. Mega exemption notification.

Registration Procedures:

Following person are liable to registration under Service Tax. o An input

service provider o Any provider of taxable services whose
aggregate value of taxable service exceed ` 9 lakhs, but the
Service Tax would be payable only when the value of Services
provided is more than ` 10 lakhs.

An application should be submit to the superintendent of central excise in

form no.ST-1 for registration within a period of 30 days.

Need to provide a copy of PAN card, proof of address of business

premise(s), constitution of the business [proprietorship, firm, company,
trust, institute etc.]

The registration shall be granted by superintendent of central excise within

7 days in form no ST-2. If the registration certificate is not granted with the
said period i.e. 7 days, the registration applied for shall be deemed to have
been granted.
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Centralized Registration: An assessee providing taxable services can

obtain the centralized registration of that premises or office which has
centralized billing system or centralized accounting system. It’s the
assessee’s option to register one of the premises as centrally registered.
Surrender of certificate of registration in the following case:-
When a registered assesse transfers his business, he should surrender his
registration. Penalty for non-registration under Service Tax - ` 10000 or ` 200
per day during default continues, whichever is higher

Note:
Service Tax Code (Registration Number) 15-digit number (Based on PAN of
the assessee).
Ex: PAN+ ST or SD+ 001 Ex: ABXFC1234AST001

Service Tax Payment:

In Service Tax we have two options of payment of Service Tax –

I. Make Payment of Service Tax physically in the specified

bank. II. Online payment of Service Tax.

Service Tax payment is liable to be made on a Monthly/Quarterly basis and

in case of deposit after the due date of payment of Service Tax; late
payment penalty is liable to be paid. The procedure for physical Deposit of
payment of Service Tax in Bank through GAR – 7 Challan

Due Date for payment of Service Tax:

As per Rule 6 of the Service Tax Rules 1994, the due date for payment of
Service Tax is separate for Individual/ Partnership Firms and others.

For Individual/ Partnership Firms: The due date for payment of Service Tax is
5th of the following Quarter, But in case of Online payment 6 th of the following
Quarter till 8 P.M.

Example-

 April to June- 5th of July

 July to Sep- 5th of Oct
 Oct to Dec- 5th of Jan
 Jan to mar- 31th of March

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For Others: For all Service Provider except Individual/ Partnership Firms
have to pay Service Tax 5th of the following Month, But in case of Online
payment 6th of the following Month till 8 P.M.

Example-
 For July month- due date 5th of august
 For March month- due date 31th of march
Exception: Service Tax collected for the Month/Quarter ending March shall be
payable by 31st March of the said calendar year.

How to maintain Service Tax in Tally?

Here we take an example of Reverse Charge Entry in Tally. In manpower

supply service, Service provider charge 25% Tax and Remaining 75% Tax
liability is on Service
Receiver.

Step 1: Activate Service Tax option from Company Fetchers window (F11
F3)

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1. Party Ledger: (ABC Ltd.)

Ledger name ABC Ltd.
Under Sundry Creditors
Maintain balances bill by bill Yes
Is Service Provider/Receiver Yes
Set/Alter Service Tax Details Yes

Step 2: Create Necessary Ledger

2. Expanse Ledger:

Ledger name Manpower Service

Under Indirect Expanse
Is Service Tax Applicable Yes
Default Service Category

3. Service Tax Ledger

Ledger name Service Tax@12%

Under Duties & taxes
Type of Duty Service Tax
Tax Head Service Tax

4. Education Tax Ledger

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Ledger name Education Cess@2%

Under Duties & taxes
Type of Duty Service Tax
Tax Head Education Cess

5. Secondary Education Cess Ledger

Ledger name Secondary Education Cess@1%

Under Duties & taxes
Type of Duty Service Tax
Tax Head Secondary Education Cess

Step 3: Pass the following entries

Suppose we purchase manpower service from ABC Ltd. ` 12000 Plus Service
Tax on 01/07/2012. So we have to pass

1. A purchase bill

Date Particular Debit Credit

Amount Amount
Security Service A/c Dr. `12000.00
Service Tax@12% A/c Dr. ` 360.00
Education Cess@2% A/c Dr.
01.07.2012 ` 7.00
Secondary Education Cess@1%
A/c Dr. ` 4.00
To ABC Ltd. ` 12371.00

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 Indian Institute of Computer Accountants

2. Paid to the party

Date Particular Debit Credit

Amount Amount
ABC Ltd. A/c Dr. ` 12371.00
02.07.20 To Axis Bank `
12 12371.0
0

3. Service Tax Adjustment Entry in Service Tax Voucher Class

Date Particular Debit Credit

Amount Amount

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 Indian Institute of Computer Accountants

Service Tax@12% A/c Dr. ` 1080.00

Education Cess@2% A/c Dr. ` 22.00
Secondary Education Cess@1%
A/c Dr.
` 11.00
31.07.2012 ` 1080.00
To Service Tax@12%
To Education Cess@2%
` 22.00
To Secondary Education ` 11.00
Cess@1%

4. Service Tax Payment Entry

Go to the payment voucher  Configure the voucher in single entry mode 
Press Alt+S  Give details

Date Particular Debit Credit

Amount Amount
Service Tax@12% A/c Dr. ` 1080.00
Education Cess@2% A/c Dr. ` 22.00
Secondary Education Cess@1%
01.08.2012
A/c Dr.
` 11.00
` 1080.00
To Axis Bank

Step 4: See report from

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 Indian Institute of Computer Accountants

GOT  Display  Statuary Reports  Service Tax Reports  Input Credit 

Summary  Give Date Range

VAT quick view:

 VAT (Value Added Tax) is a multi-point tax on value addition which is collected
at different stages of sale.
 VAT is applicable to intra-state sales.
 It is an indirect tax, which is collected by State Government.
 VAT has replaced a number of other taxes and its introduction has not resulted
in either increased prices to final consumers or reduced profitability of
business.
 The burden of tax is ultimately borne by the consumer of goods.
 VAT i.e. the Value added tax is relatively a new concept in our country and it
was practically introduced in the year 2005 in large no of states of the country
though initially it was introduced but taken back in mid 90’s in the state of
Maharashtra. Further Haryana was the first state to introduce it successfully in
2003.

Here we have taken an example to understand VAT in easier way:

Suppose you have purchased a textile cloth for `1,000 and after making a shirt
and a trouser, you have sold these for ` 5,000. So value addition is ` 4,000 (` 5,000

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 Indian Institute of Computer Accountants

– `1,000). VAT will be charged on this amount of ` 4,000. Thus, if the vat rate is 4%
then the amount of vat will be ` 160 (4% of ` 4,000).
Particulars Amount (`)

Purchase price - 1,000

Tax paid on purchase (Input Vat) – 40
______
Purchase price (including vat) 1,040
Less: Input Vat Credit 40
______
Net price 1,000
Add: Value Addition 4,000
______
Sale price - 5,000
Add: Tax payable on sale price (Output Vat) - 200
______
Sale price 5,200
======
VAT payable = ` 200 – ` 40 = ` 160

AT the time of purchase, you have to pay ` 1,040 (1,000 + 40 as VAT) to the seller
and at the time of sale, you will collect ` 5,200 (5,000 + 200 as VAT) from the
purchaser. The net amount of ` 160 (200 – 40) is to be paid to the Government.

General Requirements for VAT System:

 Compulsory issue of tax invoice and retail invoice: Tax invoice is

issued to a dealer/consumer who has to take input VAT Credit whereas
retail invoice is meant for inter state sales or sale to a consumer who does
not require input credit of VAT.

 Registration: There is a compulsory registration of the dealer if the

aggregate turnover exceeds a certain specified limit.

 Composition scheme: A small dealer whose turnover does not exceed a

specified limit (say in West Bengal ` 50 lakhs) can opt for composition
scheme where he shall have to pay tax himself at a small percentage of
gross turnover and in this case buyer of goods with not get input VAT
Credit.
 Tax payer identification Number (TIN): There will be a taxpayer’s
identification number of 11 digits numerical which will be unique to each
dealer.
 Input VAT: It is the amount of tax paid on purchases made by a dealer. In
the above example, input vat is ` 40.
 Output VAT: It is the amount of tax charged to the customer when goods
are sold. In the above example, output vat is ` 200.
 Input Credit: The excess amount of Input tax over output tax for the
current period which is permitted to be set off against Output tax of
subsequent periods is termed as Input Credit. In the above example, input
credit is ` 160.

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 Indian Institute of Computer Accountants
 Reverse Credit: Where a registered dealer avails of input tax credit for
purchase of goods and subsequently following are some of the instances
where reversal of input tax credit will take place in the tax period when
such occasion arises:

1. Goods purchased and subsequently returned to the seller for any reason
whatsoever;
2. Goods purchased for business but used for personal consumption, gift or
given out as free samples;
3. Goods stolen or destroyed;
4. Branch Transfer
5. Goods remaining in stock at the time of closure of business.

 Payment of VAT: The dealer has to pay VAT to the Government before or
at the time of furnishing return. Payment has to be made in prescribed
Challan. The manner and frequency of payment of tax is mentioned in the
State VAT Act. E-payment facility is also available in some states. For
Example in West Bengal dealer have to pay tax on monthly basis i.e. April
months tax due date is 20 th may (except march), in case of any delay the
dealer have to pay 1% P.M interest.
 Submission of Return: In West Bengal every registered dealer has to file
VAT-returns quarterly. The returns are to be filed in prescribed form within
the prescribed time from the end of the period concerned. The returns are
to be accompanied with the challans evidencing payment of VAT. In some
states like West Bengal, e-filing of VAT returns has been made compulsory.

How to maintain in Tally:

Here we take an example where you can pass an invoice with VAT & Service
Tax.

Suppose Company sold 4 Pcs Inspiron Queen 14 @ ` 32850 and 2 Pcs Dell-
Vostro A840 @
27500 to Raju Traders and charge for installation with extra ` 1500 per system
on 02.03.2012.

Step 1: Activate necessary option from F11 F3 and give required details
Step 2: Create necessary Masters
Step 3: Pass the below mention entry

Quick View TDS:

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 Indian Institute of Computer Accountants

TDS means Tax Deduction at Source. TDS is one of the modes of

collection of taxes, by which a certain percentage of amounts are
deducted by a person at the time of making/crediting certain specific
nature of payment to the other person and deducted amount is remitted to
the Government account.

Every person responsible for making payment of nature covered by TDS

provisions of Income Tax Act shall be responsible to deduct tax. However in
case of payments made under sec. 194A, 194C, 194H, 194I and 194J in
respect of individual and HUF, only if the turnover or professional receipt
exceeds sum of ` 60 lakh or ` 15 lakh respectively in previous year, he is
required to deduct tax at source.

Every deductor is required to obtain a unique identification number called

TAN.

Time of Deduction of Tax:

The payer should deduct tax either at the time of crediting the account of the
payee (i.e. when due) or at the time of payment whichever is earlier.

The tax deducted has to be deposited in the designated banks within

specified time. This is detailed below:

 By or on behalf of the Government : on the same day,

 By or on behalf of any other person: before the 7th of the following
month.

However, if the amount is credited in the books on 31st March then the tax
should be remitted by 31st May.
Note: w.e.f., 01.04.2008 electronic payment of tax has to be done by all
corporate assesses and all persons whose cases are auditable under section
44B.

Use challan no. 281 for depositing TDS amount.

Payment of TDS to the Government

Nature of Payment Time-limit for deposit of tax

Tax is deducted by or on On the same day

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 Indian Institute of Computer Accountants

behalf of the Govt.

When the Assessing Officer uarterly payment of tax

permits q
Where deduction is made Within 15th June, 15th September, 15th
for salary December
& 15th March
Where deduction is Within 15th July, 15th October, 15th
made u/s 194A, 194D or January &
194H 15th April
In any other case
Where deduction is
made u/s
192, 194, 194B, 194BB, Within 7 days from the end of the month
194EE & 194F
Where deduction is Within 7 days from the end of the month in
made in any other section which tax is deducted at source. However,
when tax is deducted (on credit basis and
not on payment basis) on the last day of
accounting year, it can be deposited within
2 months from the date of deduction.

The due dates for filing of TDS:

 15th of July for Quarter 1 (April-June)

 15th of October for Quarter 2 (July-September)
 15th of January for Quarter 3 (October-December)  15th June for
last Quarter (January-March)

Form No. Quarter Due date

ending
30th June 15th July
Salary – 24Q 30th 15th
Other than salary (to a resident) – 26Q September October
Other than salary (to non—resident) – 27Q 31st December 15th January
31st March 15th May
Persons have to compulsorily file e-TDS statements:
 All government offices/Departments
 All companies /corporations
 All persons whose cases are auditable

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 Indian Institute of Computer Accountants

 All persons whose TDS statements contain more than 50 deductees.

Issue of TDS Certificate:

Form
Payment Time-limit for issue of certificate
No.
Salary 16 30th April of next year
1 month from the end of the month during
Other than
16A which the credit has been given or the sums
salary
have been paid

Rates of TDS

Sl. Sectio O Nature of Cut Off Amount Rate %

No n f Payment in 01.04.2 01.07.20 HUF/IND Other
. Act brief 0 12 s
12
1 192 Salaries Salary income Average Rate
must be more then
exemption limit
after deductions.
2 193 Interest on 2500 5000 10 10
debentures
3 194 Deemed dividend - - 10 10
4 194A Interest other than 10000 10000 10 10
Int. on securities
(by Bank)
4A 194A Interest other than 5000 5000 10 10
Int. on securities
(By
others)
5 194B Lottery / Cross Word 10000 10000 30 30
Puzzle
6 194BB Winnings from Horse 5000 5000 30 30
Race
7 194C(1 Contracts 30000 30000 1 2
)
8 194C(2 Sub-contracts/ 30000 30000 1 2
) Advertisements
9 194D Insurance 20000 20000 10 10

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 Indian Institute of Computer Accountants

Commission
10 194EE Payments out of 2500 2500 20 -
deposits under NSS
11 194F Repurchase of units 1000 1000 20 20
by
MF/UTI
12 194G Commission on sale 1000 1000 10 10
of
lottery tickets

13 194H Commission or 5000 5000 10 10

Brokerage
14 194I Rent (Land & 180000 180000 10 10
building) furniture &
fittings)
Rent (P & M , 180000 180000 2 2
Equipment
15 194J Professional/Technica 30000 30000 10 10
l
charges/Royalty &
Non-compete fees
16 194J(1)(ba) Any remuneration or NA NIL 10 10
commission paid to
director of the
company(Effective
from 1 July 2012)
17 194LA Compensation on 100000 200000 10 10
acquisition of
immovable property

Note:
 No surcharge to be added with the rates.
 The rates are to be further increased by Education Cess at the rate of
2% and Secondary and Higher Education Cess at the rate of 1% only
in case of salaries.
 Where PAN of the deductee is not available, TDS will be deducted at
the prescribed rate or 20% which one is higher.
 Yearly Limit u/s 194C: Also where the aggregate of the amounts
paid/credited or likely to be paid/credited to Contactor or Sub-
contractor exceeds ` 75000 during the financial year, TDS has to be
made u/s 194C.

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 Indian Institute of Computer Accountants

This is the due Entry

Payment to party

TDS Payment Entry

TDS in Tally:

Here we take two examples:

Example 1:
Company Paid Rent of January 2013 to landlord Mr. B P Banerjee (PAN:
ASDFB5432K, ST Reg. No: ASDFB5432KST002on 01.02.2012 through Axis
Bank? [Month Gross Rent is ` 26000]

Step 1: Activate necessary option from F11 F3 and give required details
Step 2: Create necessary Masters
Step 3: Pass the below mention entry

Note: In this case TDS is deducted on service value only.

Example 2:
Purchase advertisement service from Third Eye Ltd (PAN: ADFCT7654P)
amounting excluding Service Tax ` 125000 on 02.02.2013 and paid the entire
amount on same day through AXIS Bank.

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 Indian Institute of Computer Accountants

TDS payment Entry

Pass the Invoice

Press Alt+S and pass TDS deduction Entry

Paid to Party

Note: In this case TDS deduct on Service amount plus service Tax. Only in
197(I) TDS deduct on service value.

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