Sales-Side WHT (via Cash Receipt)
Sometimes the tables are turned: your customer withholds tax from paying you — India’s 194Q, an Argentine perception, a Brazilian customer-side IRRF. You receive less cash than the invoice, and the difference goes to the tax authority on your behalf. REDA handles this differently from purchase-side WHT, for a good reason.
Access you'll need. Creating and posting Cash Receipts (including WHT Received) 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. The one-time WHT Enabled (Sales) switch and Default WHT Receivable account are set on the Entity by an administrator.
The pattern: invoice full, then two receipts
The invoice posts at its full value; the withholding shows up as a second Cash Receipt when the certificate arrives:
Worked example
You invoice a customer ₹100,000. They withhold 2% and pay you ₹98,000, sending a certificate for the ₹2,000.
| Step | Entry |
|---|---|
| 1 · Post invoice (full) | DR Accounts Receivable ₹100,000 / CR Revenue ₹100,000 |
| 2 · Cash receipt (net) | DR Cash ₹98,000 / CR Accounts Receivable ₹98,000 |
| 3 · WHT certificate receipt | DR WHT Receivable ₹2,000 / CR Accounts Receivable ₹2,000 |
After step 3 the receivable is fully cleared (₹98,000 + ₹2,000 = ₹100,000), and you hold a ₹2,000 WHT Receivable — tax paid on your behalf that you’ll claim against your own tax liability.
Strictly, each receipt row above is the combined effect of two moves — like every cash receipt, posting first parks the credit in the entity’s unapplied-cash holding account, and applying the receipt then moves it onto the invoice. The certificate receipt works the same way: DR WHT Receivable / CR the holding account at posting, then the application clears Accounts Receivable. One deliberate difference: a WHT Received receipt is never picked up by auto-apply — you apply it to the specific invoices the certificate covers, by hand. If you try otherwise the system says so: “WHT Received receipts must be manually applied to specific invoices.”
What the entity needs first
The WHT Received receipt type is gated by two one-time settings on the Entity, and one rule about the form — each enforced with an exact message at posting:
| The message | What it means / 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.” | The master switch — your administrator turns on WHT Enabled (Sales) for entities whose customers withhold. |
| “Entity requires a Default WHT Receivable GL Account to post a WHT Received receipt. Configure it in Entity setup.” | The certificate’s asset needs a home — set the entity’s Default WHT Receivable account once. The receipt’s Cash Account is filled with it automatically. |
| “Bank Account must be blank for WHT Received type. WHT receipts represent tax certificates, not bank deposits.” | No money hit a bank — clear the Bank Account field. For the same reason, these receipts never appear in bank deposits or bank reconciliation. |
Clearing the receivable
The WHT Receivable balance represents tax credits sitting with the authority. You clear it when you offset it against your own tax liability (or receive a refund) — typically via a journal at filing time. Until then it’s a real asset on your balance sheet, backed by the certificates you’ve recorded.
Common mistakes to avoid
| Mistake | Why it hurts | Do this instead |
|---|---|---|
| Invoicing the customer the net amount | Your revenue is understated and there’s nothing for the certificate to clear | Invoice in full; the withholding arrives later as its own receipt |
| Recording the certificate as part of the cash receipt | The receipt no longer matches the bank statement, and the WHT Receivable is never built | Two receipts: a normal one for the money received, a WHT Received one for the certificate |
| Putting a bank account on the certificate receipt | A certificate isn’t a deposit — posting is blocked with the exact message above | Leave Bank Account blank; the Cash Account defaults to the WHT Receivable |
| Writing off the shortfall as a bad debt or discount | You lose a real, claimable tax asset and misstate the customer relationship | Chase the certificate — the invoice’s residual balance is your reminder that one is outstanding |
| Letting WHT Receivable grow unreviewed | Certificates lapse into filing deadlines; unclaimed credits are money left with the authority | Reconcile the account against certificates each filing period and claim the credit |
Where to go next
- Understanding Withholding Tax — the concepts behind sales-side WHT.
- WHT Rules & Rates — the rules and rates involved.
- Purchase-Side WHT (TDS on Bills) — the more common purchase case.
- WHT Transactions & Reporting — how withheld amounts are recorded.
Frequently asked questions
Because you don’t know the customer’s withholding until their certificate arrives, and estimating it on the invoice would risk a wrong figure on your books. Recording it at cash time, from the certificate, keeps it accurate — and keeps your bank reconciliation clean, since the cash receipt matches the actual money received.
Then the invoice shows a residual balance equal to the withheld amount — a useful flag that a certificate is outstanding. You follow up with the customer; once it arrives, the “WHT Received” receipt clears the balance.
To a WHT Receivable account (set as the entity’s default for sales-side withholding). It’s an asset — tax paid on your behalf that you’ll recover against your own liability.
Same idea (tax withheld at source), opposite direction and mechanism. Purchase-side: you withhold, and a rule engine computes it on the bill automatically. Sales-side: the customer withholds, and there is no rule engine — you record the certificate’s amount by hand at cash time. See Purchase-Side WHT.
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