SAP Knowledge Base Article - Public

3587527 - Union Budget of India 2025-26: Changes related to TDS section 194I and 194B

Symptom

The India Finance Budget 2025-2026 introduces key amendments to Tax Deducted at Source (TDS) regulations, specifically impacting Sections 194I and 194B.

Changes Effective from April 1, 2025:

  • Section 194I (Rent):
    • The threshold for TDS deduction on rent payments is being changed from ₹2,40,000 per financial year to ₹50,000 per month or part of a month.
    • TDS will now be deducted on the entire rental amount if it exceeds ₹50,000 in a given month, rather than only on the amount exceeding the threshold.
  • Section 194B (Lottery/Game Winnings):
    • The threshold for TDS deduction on winnings from lotteries, crossword puzzles, card games, and other games (excluding online games and horse races) is being changed to ₹10,000 per single transaction.
    • This is a change from 10,000 per financial year.

Environment

SAP S/4HANA Cloud Public Edition

Resolution

Here's how to set up your system for TDS calculations as per sections 194I and 194B:

 

Sl. No.

Section

Nature of payment

Current Provision

Proposed change

1

194I

Rent of Plant & Machinery, Land & Building

Threshold limit is Rs. 2,40,000 in a FY.

Threshold limit is Rs. 50,000 P.M or part of a month.

For TDS Section 194I (Rent Payments):

To check if rent payments cross Rs. 50,000 per month and deduct TDS, refer the below mentioned customization steps:

  1. Set Accumulation Type:
    • Go to the Define Withholding Tax Type for Invoice Posting (ID: 104225) activity.
    • Choose Configure for this activity. Choose the country/region key. 
    • Look for the withholding tax type for 194I. For this withholding tax type, set the "accumulation type" to "Per month". This tells the system to track payments monthly.
  2. Make sure the corresponding withholding tax code(s) of 194I has the correct TDS rate.
  3. Set Minimum Amount:
    • Open the Define Min/Max Amounts for Withholding Tax Codes (ID: 103915) activity.
    • Choose Configure for this activity. Choose the country/region key.
    • Look for withholding tax code for your 194I. For this withholding tax code, set the "minimum base amount" to INR 50,000 and set the "valid from date" to 01.04.2025.
  4.  In Vendor Master, ensure the withholding tax code is added to the vendor's record.

Now, when an invoice for rent is entered, the system will:

  • Check if the total rent paid to that vendor in that month has crossed Rs. 50,000.
  • If it has, it will calculate TDS on the entire amount of that month's invoice.

 

Important:

  • The system can only check either the monthly (50,000) or yearly (6 lakh) limit, not both at the same time. Business have to decide which one they want to use. The accumulation setting at the withholding tax type level decides this check.
  • Down Payments: If you use down payments, the system treats them separately from invoices. You might need to manually adjust TDS if the total amount (invoices + down payments) crosses the limit. This aggregation check is available only for TAN based exemptions in India at vendor PAN level which is not the case here.

 

For TDS Section 194B (Lottery/Game Winnings):

 

2

194B

Winning from Lottery, crossword, Puzzle, card game or other game. (Other than winning from Online Game or Horse race)

Threshold limit is Rs. 10,000 in a FY.

Rs. 10,000 in respect of a single transaction.

To deduct TDS if the winning amount is Rs. 10,000 or more per transaction, refer the below mentioned customization steps:

  1. Set No Accumulation:
    • Go to the Define Withholding Tax Type for Invoice Posting (ID: 104225) activity.
    • Choose Configure for this activity. Choose the country/region key. 
    • Look for the withholding tax type for 194B. For this withholding tax type, set the "accumulation" to "No accumulation". This means it will check each transaction separately.
  2.  Set Minimum Amount:
    • Open the Define Min/Max Amounts for Withholding Tax Codes (ID: 103915) activity.
    • Choose Configure for this activity. Choose the country/region key.
    • Look for withholding tax code for your 194B. For this withholding tax code, set the "minimum base amount" to 10,000 and set the "valid from date" to 01.04.2025.
  3.  In the Vendor Master, ensure the withholding tax code is added to the vendor's record.

See Also

3590606 - Section 194T: TDS on Payment by Partnership Firm to Partners - SAP for Me

Keywords

TDS, section 194I, section 194B, Union Budget India 2025-2026, Income tax act, threshold value, Rent of pant and Machinery, Land and building, winning for lottery, crossword, Puzzles, Card game, online game, horse race, India, FI-LOC-FI-IN-WHT, FI-LOC-FI-IN , KBA , FI-LOC-FI-IN-WHT , Withholding Taxes , FI-LOC-FI-IN , India , Problem

Product

SAP S/4HANA Cloud Public Edition all versions