When a customer pays an invoice net of TDS, record the payment in Zoho Books with Tax Deducted? set to Yes, TDS (Income Tax), the TDS account selected, and the amount withheld entered. Zoho then clears the invoice in full: the bank receives the net amount and the TDS receivable account receives the deduction. The harder part comes later. The TDS receivable balance is only a claim until it appears against your PAN in the tax credit statement on the income tax portal, and the two do not always agree. This post covers the recording, the GST TDS variant, and the year-end reconciliation that turns the balance into actual tax credit.
Set Zoho Books up for TDS on sales
According to Zoho's help for the India edition:
- Go to Settings > Organisation Settings > Taxes & Compliance > Direct Taxes, and open Income TDS Settings under TDS.
- Choose whether TDS is applied At Transaction Level, on the invoice subtotal, or At Line Item Level, and save.
- Create the rates you need under Income TDS Rates > + New TDS Tax, with the tax name, rate, applicable Income-tax Act and section.
Zoho uses TDS Payable and TDS Receivable accounts by default, and these can be changed. On the sales side, TDS deducted by customers goes to TDS Receivable.
Recording a payment received net of TDS
For an invoice of, say, ₹1,18,000 (₹1,00,000 plus 18% GST), where the customer deducts TDS at 10% on the value before GST:
- Open the invoice under Sales > Invoices and click Record Payment.
- Enter the amount received in the bank, here ₹1,08,000.
- Next to Tax Deducted?, select Yes, TDS (Income Tax), choose the TDS Tax Account, and enter the Amount Withheld, here ₹10,000.
- Click Record Payment. The invoice shows as paid. The bank is debited ₹1,08,000 and TDS Receivable ₹10,000.
If the customer's figure differs. Record the TDS the customer actually deducted, as shown in their remittance advice or TDS certificate. If it does not match what you expected, for example because it was calculated on the GST-inclusive amount, take it up with the customer.
The rate here is only an illustration. The applicable rate depends on the nature of the payment and the provision under which the customer deducts.
Where it can go wrong
1. The payment is recorded at the net amount without TDS. The invoice is left showing a small open balance. Over months, receivables fill up with small "short payments" that are really TDS. Fix each by recording the TDS against the invoice. Do not write them off as bad debts or discounts.
2. TDS on advances. A customer who pays an advance may deduct TDS on it. Zoho's help lists Payments Received among the transactions to which TDS can be applied, so record the TDS with the advance, and apply the advance to the invoice when it is raised.
3. Income-tax TDS and GST TDS mixed up. They are separate deductions under separate laws, and they go to separate places. Keep them in separate accounts.
GST TDS is a different deduction
Under section 51 of the CGST Act, government departments and establishments, local authorities, governmental agencies and certain notified bodies, such as public sector undertakings, deduct GST TDS on certain payments to suppliers. This is separate from income-tax TDS, and Zoho Books handles it separately:
- Enable it under GST TDS Settings, and mark the customer with Is GST TDS applicable?. This is on by default for customers created with the Tax Deductor GST treatment.
- On the invoice, select the rate in Select a GST TDS. Zoho notes that this does not change the invoice total or post to any account at that stage.
- When recording the payment, set GST TDS Deducted? to Yes. The amount appears in GST TDS Amount.
The credit then has to be claimed on the GST portal. Under Services > Returns > TDS and TCS credit received, the supplier accepts or rejects each entry reported by the deductor and files the statement. The GSTN tutorial states that the accepted amount reaches the electronic cash ledger only after the statement is filed. GST TDS recorded in the books but never accepted on the portal is a receivable the business cannot use.
The year-end reconciliation that matters
The income-tax TDS receivable is useful only when it appears in the tax credit statement against your PAN, and is claimed in the return. Under the Income-tax Rules, 2026, the annual information statement is Form 168 (earlier Form 26AS), under Rule 245, and the TDS certificate for income other than salary is Form 131 (earlier Form 16A), under Rule 215. Reconcile at least quarterly, after each TDS return due date, and fully before the income tax return is filed.
- Run the TDS Receivable ledger for the year from Zoho Books, by customer.
- Download the statement (Form 168, earlier Form 26AS) from the income tax portal and list TDS by deductor, by TAN.
- Match customer by customer. Differences fall into three kinds:
- In the books, not in the statement. The customer deducted but has not deposited or reported it, or reported it against a wrong PAN or in another quarter. Ask the customer for their TDS return details, the certificate, or a correction.
- In the statement, not in the books. A payment recorded without TDS, or TDS posted to the wrong customer. Correct the books.
- Different amounts. For example, TDS on the GST-inclusive value, or on a different invoice. Agree the difference with the customer.
- Collect the TDS certificates (Form 131, earlier Form 16A) for the year from each customer and file them with the reconciliation.
- Decide what to do with what remains. Amounts that cannot be traced to the statement after follow-up should be reviewed before the return is filed. Do not claim them.
Also check the timing. Where an invoice falls at the year-end boundary, make sure the TDS receivable and the related income are recorded in the same financial year.
A short monthly routine
- Record every customer receipt with the TDS withheld, never as a short payment.
- Review open invoices with small balances. Some may be unrecorded TDS.
- After each quarterly TDS return due date, run the comparison with the statement for the quarter and follow up promptly. Corrections are easier for the customer while the quarter is recent.
- Accept GST TDS entries on the GST portal every month.
Where this fits
TDS recording is part of keeping receivables clean. If your Zoho Books organisation also handles GST e-invoicing, see setting up Zoho Books for Indian GST e-invoicing.
Wissen Solutions maintains Zoho Books for Indian businesses, including TDS receivable reconciliation, through our Zoho Books consulting and migration services.
Sources (checked 26 October 2026)
- Zoho Books (India): Income TDS settings and recording TDS on payments received
- Zoho Books (India): GST TDS
- Zoho Books (India): Record payment for an invoice: Yes, TDS (Income Tax)
- Income Tax Department: Form 168 FAQs: Form 168 (earlier Form 26AS), Rule 245
- Income Tax Department: Form 131 FAQs: Form 131 (earlier Form 16A), Rule 215
- CBIC: Standard operating procedure on GST TDS: deductors under section 51
- GSTN tutorial: TDS and TCS credit received
- Worked example checked by calculation: ₹1,00,000 + 18% GST = ₹1,18,000; TDS 10% × ₹1,00,000 = ₹10,000; net received ₹1,18,000 − ₹10,000 = ₹1,08,000.