WHT on Cash Receipts
In some countries the roles from purchase-side withholding flip: your customer is the one required by law to keep back a slice of what they owe you and remit it to the tax authority in your name. You invoice 100, the bank shows 90, and the missing 10 isn't a short-payment — it's tax the customer paid on your behalf, evidenced by a withholding certificate. This article shows how to record that in REDA Financials so nothing looks unpaid and the tax credit isn't lost.
Access you'll need. Creating and posting Cash Receipts requires the Accounts Receivable v2 permission set (AR clerks & managers) or Accounting Admin v2 (system administrators). The Accounting Controller v2, Accounts Payable v2, and Read Only v2 sets can view receipts but not create or post them. Sales-side WHT must first be enabled on the entity by an administrator.
One payment becomes two receipts
Suppose Meridian's India entity invoices a corporate tenant ₹1,00,000 and the tenant, as the law requires, withholds 10%. Two things arrived — ₹90,000 of money and a ₹10,000 certificate — so you record two Cash Receipts:
| Receipt 1 — the money | Receipt 2 — the certificate | |
|---|---|---|
| Type | Receipt | WHT Received |
| Amount | ₹90,000 | ₹10,000 |
| Payment Method | Wire / ACH / Check… | Withholding Tax Received |
| Bank Account | Your bank — it's a deposit | None — it's a tax certificate, not money in the bank |
| Reference | The bank transaction ID | The certificate number |
Apply both to the invoice and it closes completely: ₹90,000 settled by cash, ₹10,000 settled by the certificate. The form even guides the difference — a WHT Received receipt refuses a bank account ("Bank Account must be blank for WHT Received type. WHT receipts represent tax certificates, not bank deposits.").
Why the invoice knows nothing about withholding
Notice that nothing in this article touches the invoice. That's by design: a Sales Invoice always posts at its gross amount — the full ₹1,00,000 receivable — because that's what the customer legally owes you. Withholding is recognized on the cash receipt side, at the moment the customer actually pays and the certificate exists as evidence. You never bill net of withholding, never edit the invoice down, and never issue a credit memo for the withheld slice — the shortfall isn't a price reduction, it's your own money parked with the tax authority.
Entering the certificate receipt
The WHT Received receipt is the same New Cash Receipt form with a few fields behaving differently:
| Field | On a WHT Received receipt |
|---|---|
| Type | Set it to WHT Received — this switches the behavior of everything below. |
| Amount | Exactly what the certificate says — typed by you, not calculated. There is no rule engine on the sales side; the customer did the computing. |
| Payment Method | Withholding Tax Received. |
| Bank Account | Cleared automatically and must stay blank — a certificate is not a deposit. |
| Cash Account | Defaults to the entity's Default WHT Receivable account — the ledger home for certificates. |
| Reference (required) | The certificate number — your one-click trail at filing time. |
| Receipt Date | The certificate's date; the accounting period derives from it as usual. |
Post it, then open Apply Cash Receipt and match it to the specific invoice the customer withheld against. This last step is always manual — auto-apply deliberately refuses WHT receipts, because a certificate belongs to a particular invoice, not to "whatever is oldest."
Where the withheld amount goes in the books
The certificate receipt doesn't touch cash. It moves the shortfall into a WHT Receivable account — a tax credit you'll claim against your own tax liability when you file:
| Account | Debit | Credit |
|---|---|---|
| Posting the WHT Received receipt | ||
| Withholding Tax Receivable | ₹10,000 | |
| Customer Deposits and Prepayments Received | ₹10,000 | |
| Applying it to the invoice | ||
| Customer Deposits and Prepayments Received | ₹10,000 | |
| Accounts Receivable — Trade | ₹10,000 | |
Net effect: the customer's receivable is cleared in full, and ₹10,000 now sits as a receivable from the tax authority instead. Your invoice was posted at its gross amount all along — nothing about the invoice changes.
What must be set up (once)
Enable sales-side withholding on the entity
The entity setting WHT Enabled (Sales) must be on — posting a WHT Received receipt without it is refused: "Sales-side WHT is not enabled for this entity."
Give the entity a Default WHT Receivable account
The ledger home for certificates: "Entity requires a Default WHT Receivable GL Account to post a WHT Received receipt." Your administrator sets both in entity setup.
The rules that keep WHT receipts clean
Each guard below is the exact message you may meet, with the remedy beside it:
| The message | What to do |
|---|---|
| "Sales-side WHT is not enabled for this entity. Enable WHT Enabled (Sales) on the Entity before posting a WHT Received receipt." | A one-time entity switch — your administrator turns it on for entities in withholding jurisdictions. |
| "Entity requires a Default WHT Receivable GL Account to post a WHT Received receipt. Configure it in Entity setup." | The certificate needs its ledger home — set once, alongside the switch above. |
| "Bank Account must be blank for WHT Received type. WHT receipts represent tax certificates, not bank deposits." | Clear the bank field — the form does this itself when you pick the type. |
| "WHT Received receipts must be manually applied to specific invoices." | Auto-apply refuses certificates by design — open the Apply screen and match it to its invoice. |
| "Cash Receipt and Sales Invoice must have the same Customer." | A certificate settles the withholding customer's own invoice — never another account's. |
Common mistakes to avoid
| Mistake | Why it hurts | Do this instead |
|---|---|---|
| Recording only the net cash and moving on | The invoice keeps a ₹10,000 open balance, ages as "overdue", and the tax credit is never claimed | Record both receipts — the money and the certificate — and apply both |
| Invoicing the customer net of the expected withholding | The books understate revenue and receivables; the certificate then has nothing to settle | Always invoice gross; withholding is recorded at payment time from evidence |
| Writing the shortfall off as a credit memo or discount | You give away money that is actually recoverable from the tax authority | A WHT Received receipt moves it to WHT Receivable, where it offsets your own tax bill |
| Recording the certificate before it exists | WHT Receivable claims a credit you can't evidence — an audit and filing problem | Wait for the certificate (or the authority's records confirming the deduction), then record it |
| Putting a vague Reference on the certificate receipt | At filing time nobody can tie the ledger balance to the certificates on hand | Use the certificate number itself as the Reference |
Practical habits
- Record the certificate as soon as it arrives — until then, the invoice shows a ₹10,000 open balance and will drift into aging as if unpaid.
- Use the certificate number as the Reference — when you claim the credit at filing time, the trail from ledger to certificate is one click.
- Reconcile the WHT Receivable account periodically against the certificates on hand and the tax authority's records (in India, the tenant's deduction should appear in your Form 26AS).
Where to go next
- Understanding Withholding Tax — both directions, one concept.
- WHT on Purchase Invoices — when you are the one withholding.
- Applying Receipts to Invoices — the application mechanics used here.
Frequently asked questions
Ask for the certificate. A legitimate withholding comes with one (and appears in the tax authority's records); a short-payment doesn't. Record cash for what arrived either way — but only record a WHT Received receipt when you have certificate evidence.
No — and you wouldn't want to. The money needs a bank account and will appear on your bank statement; the certificate must not (it never hits the bank). Two receipts keep reconciliation honest and the tax credit visible.
It's your money at the tax authority — typically offset against your own income-tax liability when you file (your accountant clears it with a journal entry at that point). The balance should always equal the certificates you hold but haven't yet claimed.
Cash-sale (Receipt-type) invoices settle themselves instantly and don't accommodate a certificate. When a customer withholds, bill them with a normal Invoice-type document and record the two receipts as above.
Because on the sales side the customer does the calculating — different customers may apply different rates, thresholds, or exemptions to you. Your job is evidence-based: record exactly what the certificate says. (Purchase-side withholding, where you are the deductor, is the direction with a rule engine — see WHT on Purchase Invoices.)
No — it has no bank account, touches no cash, and will never match a statement line. That's exactly why it must be a separate receipt from the money: the ₹90,000 reconciles against the bank; the ₹10,000 lives in WHT Receivable until you claim it.
One WHT Received receipt for the certificate's total is fine — then apply it across the invoices it covers from the Apply screen, entering each invoice's withheld portion. The applications record the per-invoice split; the Reference still ties everything to the one certificate.
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