Works Contract | How to deal in Tally : Works Contracts.

works contract in tally

Works Contracts can be managed in Tally a more systematic way

We have already discussed a lot about vat and excise in tally and also read about concept of VAT. Today we will see the concept of works Contract and how to deal in Tally

Works Contracts, on Which VAT, Service Tax and TDS are applicable can be recorded in Tally.ERP 9. Works Contract transactions can be recorded in Purchase Voucher (Account Invoice Mode)

WORKS CONTRACT EXAMPLE

Example: On 10-10-2009 ABC Company received Bill -0052 from  Shreya Builders & Developers for Rs. 58,384.80 for the given Work Contract.

In the above transaction – Purchase Cost of the Works Contract is Rs.54000, VAT is @ 4%, Service Tax @ 4.12%. On the Total AmountTDS @ 1% to be Deducted.

Follow the given steps to record the above works contract

Step 1: Create Masters for Works Contract

  1. Party Ledger (supplier)
  2. Purchase & VAT Ledger
  3. Service Tax & TDs Ledger

Step 2: Record a Purchase Voucher (Book the Works Contract Purchases)

WORKS CONTRACT ACCOUNTING IN TALLY

Step 1: Create Masters

1. Party Ledger

  • Enter the Name of the Party Ledger e.g. Shreya Builders & Developers
  • Select Sundry Creditors from the List of Groups in the Under field.
  • Set Maintain balances bill-by-bill to Yes.
  • Enter the Default Credit Period, if required.
  • Set Is Service Tax Applicable to Yes. Select Not Applicable in Exemption Details screen
  • Set Is TDS Deductable to Yes.
  • In the Deductee Type field, select Company-Resident from the List of Deductee Type

2. Purchase Ledger

  • Enter the Name of the Purchase Ledger e.g. Works Contract Purchase
  • Select Purchase Accounts from the List of Groups in the Under field.
  • Set Is Service Tax Applicable to Yes. Select Works Contract Service in Category Name screen.
  • Set Is Abatement Applicable to No
  • Set Used in VAT Returns to Yes. Select Purchases @ 4% in VAT/Tax Class screen
  • Set Is TDS Deductable to Yes.
  • Select Payment to Sub-Contractors in Default Nature of Payment field
  • Set Use for Assessable Value Calculation to No
  • Press Enter to save

3. VAT Ledger

  • Enter the Name of the VAT Ledger e.g. Input VAT @ 4%
  • Select Duties & Taxes from the List of Groups in the Under field.
  • In Type of Duty/Tax field select tax type as VAT
  • In VAT/Tax Class field select the VAT class as Input VAT @ 4%
  • Set Is TDS Deductable to Yes.
  • Select Payment to Sub-Contractors in Default Nature of Payment field
  • Press Enter to save

4. Service Tax Ledger

  • Enter the Name of the Service Tax Ledger e.g. Input Service Tax- Works Contract  @ 4%
  • Select Duties & Taxes from the List of Groups in the Under field.
  • In Type of Duty/Tax field select tax type as Service Tax
  • In Category Name field select the Service Category – Works Contract Service
  • Set Is TDS Deductable to Yes.
  • Select Payment to Sub-Contractors in Default Nature of Payment field
  • Press Enter to save

5. TDS Ledger

  • Enter the Name of the TDS Ledger e.g. TDS- Works Contracts
  • Select Duties & Taxes from the List of Groups in the Under field.
  • In Type of Duty/Tax field select tax type as TDS
  • Select Payment to Sub-Contractors in Nature of Payment field
  • Press Enter to save

Step 2: Record a Purchase Voucher (Book the Work Contract Purchases)

To create Purchase Voucher

Go to Gateway of Tally > Accounting Vouchers > F9: Purchase

Set Up:

In F12: Configuration

  • Set Use Common Ledger A/c for Item Allocation is set to No
  • Set Use Defaults for Bill Allocations to No
  • Set Allow Alteration of TDS Nature of Payment in Expenses to Yes
  1. Press Alt + I for Account Invoice mode
  2. Press F2 and change the date to 10-10-2009
  3. In Party�s A/c Name field select Shreya Builders & Developers from the List of Ledger Accounts
  4. Under Particulars select Works Contract Purchase
  5. Enter Rs. 54,000 in the Amount field
  6. In the TDS Nature of Payment Details screen, accept the default details.
  7. Under Particulars select Input VAT @ 4%. VAT amount will be calculated and displayed automatically.
  8. In the TDS Nature of Payment Details screen, accept the default details.
  9. Under Particulars select Input Service Tax- Works Contract  @ 4% and press enter to view Service Tax Bill Details screen.
  10. In Service Tax Bill Details screen – in Service Tax field enter the applicable rate of Service Tax (instead of Default rate of service tax).

In the present works contract Example we have taken 4.12% as the Rate of Service Tax. Service Tax Bill Details is displayed as shown

WORKS CONTRACT SCREEN SHOTS IN TALLY

"works contract in tally"

  1. Accept the Service Tax Bill Details screen
  2. In the TDS Nature of Payment Details screen, accept the default details.
  3. Under Particulars select TDS- Works Contracts and press enter to view TDS Details screen.
  4. In TDS Details screen
  5. select the Type of Ref as New Ref
  6. In Name field select the default Bill Name – Purc-6/1
  7. In Nature of Payment field select Payment to Sub-Contractors
  8. Assessable Value and TDS Amount will be displayed automatically

"COST ALLOCATION FOR WORKS CONTRACT"

Note: TDS will be calculated on the total amount of Rs. 58384.80 (Purchase cost of Works Contract + VAT + Service Tax)

  1. Press enter to accept the TDS Details scree
  2. In the Bill-wise Details enter the details as shown

Works Contracts

Completed works contract Purchase Voucher screen is displayed as shown

  1. Press enter to save.

Check the Reports for details on Tax Deducted

  1. TDS Computation for TDS Dedcuted.
  2. Input Serice Tax details after making the payment to the Party and then check Input Credit Form.
  3. VAT Computation for VAT details.

Finally, you should also know the concept of taxation like vat, tds excise etc which may help you to understand how to incorporate taxes in your accounts.

About the author /


Mahendra is founder and CEO of the I Vision Infotech, Authorised Tally Sales and Service Partner and helping Tally users to learn Tally and accounting free through this site

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32 Comments

  1. Pradeep Agrawal

    Hello,
    I am TP & TSP, i want to learn TDL from very beigning, as i do not have any knowledge of TDL.
    Many of our customers require customization, do you provide these services ?, please reply.

    Thanks.

    • Mahendra

      Dear Pradeep,
      We provide this service through our associates.

  2. dev

    Dear sir,
    it is very very helpful article. my search is almost over.
    please describe works contract sale as well. or if there is possibility then plz do send a word file @ my email address.
    thanks a lot
    Mahender sir

    • Mahendra

      Dear Dev,
      Thanks for your input. About sales, I will write next time

  3. Amiya

    Dear Sir,
    This site is very useful for every Tally user n it helps enormously…cud U plz describe more about Works Contract Tax??? Coz this tym in our Service Tax Audit they told dat doz works in which VAT includes,dat will cum under WCT where we have to pay 4.12% service Tax….kindly mail me…waitin 4 ur kind reply.

    • Mahendra

      Amiya,
      Thanks for your input.

      • uma

        sir please tel me hw to create, display multi ledger, multi user

        • Mahendra

          Uma,
          There is already an article explaing how to create multi ledger in tally.
          Please use search option or find category filter under ledgers/groups in tally
          and what do you mean by creating mulit user ?
          are you using Tally Gold ?it is useful only for Tally Gold

          • jaseer

            we have lot of works in contracting and we are run this accounts through job wise accounts how it activate in tally software

  4. Anand Sharma

    Dear Sir,

    Thanks a lot I got lots of information from here.

    • Mahendra

      Dear Anand Sharma,
      thanks for your input

  5. Ram

    thanks to mahendra sir,
    could you please clarify about entrying physical stock voucher to equalize difference between p.stock and tally stock…..

    Thanks &regards,
    Ram

    • Mahendra

      Hi Ram,
      Pleasure of mine.
      I will post an article on the same by tomorrow just in response to your query

  6. vikas baheti

    good morning,
    hope all is well as it seems throughh continous blogging.just help me out from how to view pending order with regard to all parties and pending order number irrespect of party name

    • Mahendra

      Hi Vikas,
      How are you ? happy to see you after a long time
      I will check your query with more specific details tomorrow by I afraid that in default tally, it might be not possible. Let me try tomorrow.
      Otherwise we have to ask Bharatbhai’s help

  7. noushad vt

    sir pls help me , how to create a project accounts in tally ?

    • Mahendra

      Noushad,
      Every accounts are created based on the nature of transaction. When we are not clear about our query or do not know how to present the query in a meaningful way, no one can help us to solve the same

      • S.Chitra

        Dear Sir,

        Ours is a SSI Unit. Our management is asking us the prepare the networth statement on monthly basis i.e. Production (only labour charges) vs expenditure in tally itself. I have tried and found the solution that production can be entered through Opening stock and the same can be billed through sales account.

        But we are having sister companies also. We are doing the job work for them as well as they are doing the job work for us. We have to show all these in the production value.

        I would like to know how the pass all these internal transactions in tally, then only I can produce the fulfilled networth statement. I need your help please.

        SC

        • Mahendra

          Chitra,
          It is not possible to help everybody personally on commercial matters.
          We generally help only our clients so, I am helpless in this regard.
          But tally have published all the relevant materials step by step guides which is available for free of cost.You should read the same and I am sure you will get idea how to record your transactions.

          • S.Chitra

            Dear Sir,

            Thanks for your reply.

            As per your advice I will go through the relevant materials published by tally.

            Thanks

            S.Chitra

  8. noushad vt

    ok sir
    eg: approved quotation amount 200000,
    20% amount received ,which entry passed

  9. Krishna

    please give me a sale bill copy of work contrac with service tax entry.

  10. abinash

    sir,
    i am new to the works contract accounting. i want to know all types of transanctions in works contract, and how to prepare balance sheet and p/l account.please today reply,sir,tomorrow my interview.

  11. abinash

    sir,without any fees,u re helping us. thank u.u re really a great teacher who want to distribute knowledge.

  12. T.sureshkumar.

    how to create in tally erp9 in works contract, and what is the percentage works contract now, works contract sales and labour invoice copy sample,
    please
    thanking You,

    Accountant
    suresh.T

  13. Pushpa

    please describe works contract sale as well. or if there is possibility then plz do send a word file @ my email address.
    thanks a lot

    Pushpa

  14. chandrasekar

    preparing purchase Order:

    Product = Rs.4693.50
    +
    Excise duy 12% = Rs. 563.17(Rs.4693.50*12%)
    Education cess2%on Exciseduty= Rs. 11.26(Rs.563.17*2%)
    secondary higher edu cess1%=Rs.5.63(Rs.563.17*1%)
    input-vat@5%=4693.50+563.17+11.26+5.63=Rs.5273.56*5%=263.68
    freight = Rs.200
    TOTAL (RS.4693.5+563.17+11.26+5.63+263.68+200)=5736
    PLEASE GIVE THE WAY – CREATI
    ING LEDGER AND HOW TO GET THIS OUTUT

  15. ricardo

    We are providing labour to other companies on hire and raise the invoice. Can you suggest the best way to tackle this iissue with tally erp 9. So we have one rate which we pay as salary and the other rate charged to the client at higher rate than the rate paid as salary. How to tackle this issue ? With and without payroll enabled.

  16. shraddha

    Hi i just want to know how to enter sub contractors bills on tally erp 9 and let me the TDS head also.

  17. Gururaj

    Respected Sir, I wanted to know Method of Constrcution, Developers accounts & Real estate account in Tally. Pls revert back to me sir

  18. Micky Pardeshi

    Sir, please tell me how to pass entry of consumption of raw materials in stock journals

  19. M Tejeswar Rao

    Sir, we have received a bill Rs 1571938//- from Utkal Alumina International Ltd towards work did in road project and Utkal Alumina was deducted TDS Rs 31439/-,Sales Tax@4% Rs 62878,Retention money Rs 157194.Please sir advice me how to passed the entries in tallyerp9. Thanks, Tejeswar

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