That approach becomes impractical when dealing with a large number of invoices or frequent changes. Why can’t we implement a permanent solution for a country with 250 million people? It shouldn’t be a big challenge, especially when AI is capable of handling most of the programming.
But isn’t Advance Income Tax and Withholding Tax the same thing?
The mechanics seem to be the same.
My question is why can’t you use Withholding tax field for this?
What I understand from the example provided is that Advance Income Tax and Withholding Tax actually operate differently.
In the given example, Advance Income Tax increases the receivable, because this tax is paid by the customer to the seller as part of the invoice total. The seller then remits this tax to the tax authority, but the funds originally come from the customer.
Meanwhile, Withholding Tax reduces the receivable, because the customer deducts a portion of the invoice amount and directly remits that deduction to the tax authority. The seller receives less cash but gets a tax credit for the withheld amount.
I also agree that it would be very helpful if invoices could include a specific account at the invoice level, separate from the line items and display it in the totals section.
For example, when rounding an invoice to the nearest thousand, it would be useful to add an Income/Expense account for the rounding difference. That way, the receivable can be rounded cleanly to the nearest thousand without affecting the individual line items.
Well… to me this is exactly how advance income tax works.
Seller receives less cash because they “can’t be trusted” to pay income tax on their income. So buyer will pay some money to tax authority and seller can then claim this credit against their income tax obligations in the future.
When I’ve added Withholding tax feature on invoices, it was specifically designed to handle advance income tax concept. I just didn’t call it that way and just used generic Withholding tax naming.
In this situation Advance tax is just like Sales tax and increases customers liability to you.
In that case it would be a tax code.
Yes. But tax codes in manager can be applied to lines only. And this Advance tax is calculated like a percentage on whole invoice. So you have to add a pass through code and add a separate line. But the calculations will be manual that way. And i think thats the OP main issue that its time consuming to manually enter it.
I’m just not convinced advance income tax is meant to be increasing invoice total.
@Asif_Hussain if you would create an invoice using journal entry, how would this journal entry look like? Which specific accounts would you debit and which ones would you credit? This would make it easier to understand mechanics.