WHT Exemptions
Some vendors shouldn’t have tax withheld from their payments — they hold a lower-deduction or nil-deduction certificate (India’s Section 197), they’re a government body, or another exemption applies. REDA lets you mark a vendor exempt, record the certificate that justifies it, and — crucially — set when that exemption expires.
Access you'll need. This is vendor-maintenance, typically done by Accounts Payable v2 users (or Accounting Admin v2); permission to edit the Account record comes from the user's Salesforce profile rather than the REDA financial permission sets.
The three fields (on the vendor Account)
| Field | What it does |
|---|---|
| WHT Exempt (Purchase) | The switch — when on, no WHT is withheld from this vendor |
| WHT Exemption Certificate (Purchase) | The certificate number / legal basis — your audit defence |
| WHT Exemption Valid To (Purchase) | The expiry date — after it, the exemption is ignored |
How the gate works
On each bill, the engine checks the exemption before computing WHT:
| Situation | Result |
|---|---|
| Exempt = on, and the bill date is on/before Valid To | WHT is zero for every line — the engine reports why: “Account exempt from PURCHASE-side WHT until date.” |
| Exempt = on, no Valid To date | WHT is zero, open-ended — the reason reads “… (no expiry).” |
| Exempt = on, but the bill date is after Valid To | The exemption is ignored — WHT applies at the normal rate |
| Exempt = off | WHT applies as usual |
Note the boundary is inclusive: a bill dated exactly on the Valid To date is still exempt. And the check runs early — before thresholds, scopes, or rates are even looked at — so a valid exemption wins over everything else on the rule.
Worked example
A contractor holds a Section 197 nil-deduction certificate valid to 31 March. You mark their Account WHT Exempt (Purchase), record the certificate number, and set Valid To = 31 March.
| Bill dated… | WHT |
|---|---|
| 15 February (within validity) | ₹0 — exemption honoured |
| 10 April (after 31 March) | Normal TDS applies — exemption lapsed |
You don’t change anything on 1 April — the engine simply stops honouring the exemption once the date passes. Renew the certificate and update Valid To to extend it.
What an exemption does not do
Three boundaries keep the feature from surprising you:
- It’s all-or-nothing per vendor. While valid, it switches off every purchase-side withholding for that vendor — there is no per-section exemption. A vendor with a lower-deduction (rather than nil) certificate is handled differently: point them at a rule carrying the reduced rate instead.
- It doesn’t touch VAT/GST. Sales and purchase tax exemption is a separate mechanism (the line’s Tax Base or the party’s tax-exempt flag — see Tax Calculation). A WHT-exempt contractor’s bill still carries its normal GST.
- It’s purchase-side only. The fields govern tax you withhold. Whether a customer withholds from paying you is their decision, recorded when their certificate arrives — see Sales-Side WHT.
The certificate is your defence
When you don’t withhold tax that would otherwise apply, you need to be able to show why. The certificate field is that record — the authority’s certificate number or the legal basis — held against the vendor. Keep it accurate; it’s what an auditor asks for when a vendor’s bills show no withholding.
Common mistakes to avoid
| Mistake | Why it hurts | Do this instead |
|---|---|---|
| Marking a vendor exempt without recording the certificate | The withholding stops, but you have nothing to show for it when asked — and the penalty for under-withholding lands on you | Enter the certificate number (or legal basis) and its real expiry date together with the flag |
| Leaving Valid To blank “for convenience” | Certificates lapse; an open-ended exemption quietly keeps skipping withholding after the paper expired | Always set Valid To from the certificate; renewals are an update, not a hunt |
| Using the exemption for a lower-deduction certificate | The vendor should be withheld at the reduced rate — exempting them means withholding nothing at all | Assign a rule/rate carrying the certificate’s reduced percentage; reserve the exemption for nil certificates |
| Removing the flag when a certificate expires | Unnecessary — and you lose the record that an exemption ever existed | Do nothing: an expired Valid To is ignored automatically, and the history stays on the account |
| Backdating bills into the validity window | The exemption is honoured by bill date, so a misdated bill changes real withholding | Date bills by the document, not by what makes the exemption fit |
Where to go next
- WHT Rules & Rates — the rules exemptions override.
- Purchase-Side WHT (TDS on Bills) — where exemptions take effect.
- Understanding Withholding Tax — the concepts behind exemptions.
- WHT Transactions & Reporting — how exempt payments are recorded.
Frequently asked questions
Withholding resumes at the normal rate on the first bill dated after the Valid To date. You don’t flip a switch — the engine stops honouring the exemption based on the date.
The exemption is at the vendor level — it switches off purchase-side withholding for that vendor while valid. If a vendor is exempt for some payment types only, manage that through which WHT rule you assign (and line overrides) rather than the blanket exemption.
No system-level one — on the sales side, the customer decides whether to withhold. If they don’t, you simply receive the full amount as a normal cash receipt. See Sales-Side WHT.
No — withholding amounts are fixed when a bill posts. Marking a vendor exempt affects bills posted from then on. If an already-posted bill should have been exempt (the certificate arrived late but covers the date), unpost it and post again: the engine re-evaluates the exemption against the bill date and removes the withholding.
Don’t use the exemption — that would withhold nothing. Instead, have your administrator set up a rule (or assign an existing one) carrying the certificate’s reduced rate, and point the vendor’s default WHT rule at it, with Effective To matching the certificate’s expiry.
Almost always an expired certificate — check the Valid To date against the bill date. If the bill is dated after the exemption lapsed, the engine correctly applies normal withholding. Renew the certificate and update Valid To.
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