Tracking income tax in Sahidha
Everything on this page can be recorded from one guided screen: New entry → Tax. Pick what happened (refund received, extra tax paid, advance tax, return filed, TDS deducted), type the figures off your bank statement and intimation, and Sahidha creates the right entries — including the tax account itself on first use, and interest worked out automatically so round-offs never bother you. The rest of this page explains what happens underneath and the manual path for power users.
Income tax is confusing to record because the money moves in several places across two years — tax is deducted from your salary and interest during the year (TDS), you may pay advance tax yourself, and only next year is the final tax assessed, leaving a refund or a bit more to pay, usually with some interest. If you just enter each bank line as it lands, your reports end up wrong: salary looks smaller than it was, the refund looks like income, and tax gets counted twice.
This guide shows the one setup that keeps everything correct — your income reads gross, your tax appears exactly once, and interest is the only thing that touches Income & Expenditure.
Everyone who files a return gets their own Income Tax account. If two family members both have TDS, make one for each.
1. Create the "Income Tax" account (one-time)
Think of the Income Tax department as someone who is holding your money. Every rupee of TDS and advance tax is money they owe you back; the final assessment settles up. So it's not a bank — it's a receivable.
- Go to Accounts → New account.
- Set Type to "Loan / receivable (person, tax refund…)".
- Name it clearly, e.g.
Income Tax — Raj. - Person / institution:
Income Tax Department. - Opening balance: if you're starting mid-history, put last year's total
TDS here (the amount the department was already holding for you). Starting
fresh from this year? Leave it
0.
How to read the balance later:
| Balance | Meaning |
|---|---|
| Positive | The department owes you (TDS + advance tax paid in). Your refund-in-waiting. |
| Zero | Fully settled — nothing due either way. |
| Negative | You owe them (assessed tax exceeds what's been paid). |
2. During the year
TDS on salary, interest or rent
Your bank only receives the net amount — say ₹90,000 salary after ₹10,000 TDS. You want the report to show the full ₹1,00,000 as salary, and the ₹10,000 to build up as money the department is holding.
- Add or import the salary credit as normal: ₹90,000, category Salary.
- Open that entry and choose Add component.
- Fill it in:
- Kind: Linked account (Net Worth) → pick your Income Tax account.
- Type: TDS.
- Mode: Additive (income on top).
- Amount: ₹10,000.
- Save.
Result: Income & Expenditure shows ₹1,00,000 under Salary (gross), and your Income Tax account balance rises by ₹10,000. Do the same for TDS on FD interest, rent, etc.
Advance tax you pay yourself
This is your money going on deposit with the department — not an expense. Record it as a plain transfer:
- From your bank account → to your Income Tax account.
Use the normal transfer flow (or open the bank debit and Convert to transfer, choosing the Income Tax account). It leaves Income & Expenditure untouched and pushes the Income Tax balance up.
3. At filing time (next year)
Step A — record the tax that was actually assessed
When your return is filed and the final tax for the year is known, record it as an expense on the Income Tax account itself. There's no special button on the account — use the normal New entry form and just point it at that account:
- Click ➕ New entry (top bar / left nav).
- Type: Expense.
- Account: select your Income Tax account (it's in the dropdown like any other account).
- Category: Tax Payment, amount = the total assessed tax for the year. Save.
Result: Income & Expenditure now shows the year's real tax as a single expense, and the Income Tax account balance drops to exactly your refund due (if positive) or amount payable (if negative). That number should match your ITR — a built-in cross-check.
Step B — the refund (or the extra payment)
A refund usually arrives as one bank credit that mixes two very different things: your own money coming back (not income) plus a little interest under section 244A (this is taxable income). Record it as one entry with a component so only the interest counts:
Example: refund of ₹10,800 = ₹10,000 principal + ₹800 interest.
- Add the bank credit: ₹10,800, category Interest on Tax Refund (create this income category once, or use Other Income).
- Add component:
- Kind: Linked account (Net Worth) → your Income Tax account.
- Type: Other (or Interest).
- Mode: Carve-out (part of it).
- Amount: ₹10,000 (the principal).
- Save.
Result: Income & Expenditure shows only the ₹800 interest as income; the ₹10,000 principal leaves your income entirely and draws the Income Tax account down. If everything was entered through the year, the account now sits at zero.
Paid extra instead of a refund? It's the mirror image. Record the bank debit (e.g. ₹5,200 = ₹5,000 tax + ₹200 s.234 interest), category Tax Payment, and add a Carve-out component of ₹5,000 linked to the Income Tax account. I&E shows only the ₹200 interest as an expense; the ₹5,000 credits the tax account.
Why this works
- Your bank statement stays honest. Every bank row is entered once, at the amount that actually hit the account — nothing is edited or split away.
- Income is gross. TDS is folded back in, so Salary and Interest read their true pre-tax figures — exactly what your Form 26AS / AIS shows.
- Tax is counted once. Only the assessed tax is an expense. TDS and advance tax are deposits, not expenses; the refund principal is your own money back.
- Interest is separated. The only tax-related things in Income & Expenditure are the s.244A interest you received and the s.234 interest you paid.
- It self-audits. TDS + advance tax − assessed tax should equal the refund you actually receive. If the Income Tax account doesn't land near zero after the refund, an entry is missing.
Quick reference
| Event | Where | Entry |
|---|---|---|
| TDS deducted | On the bank receipt | Additive component (Type: TDS) linked to Income Tax account |
| Advance tax paid | Bank → Income Tax | Plain transfer |
| Tax assessed | On the Income Tax account | Expense, category Tax Payment |
| Refund received | On the bank credit | Income (Interest on Tax Refund) + Carve-out of principal linked to Income Tax account |
| Extra tax paid | On the bank debit | Expense (Tax Payment) + Carve-out of tax linked to Income Tax account |
Splitting an entry into components is a newer capability. If you don't see the Add component button, ask your family admin to switch it on under Settings → beta features.
If you previously entered a refund with the interest as the category and never reduced a tax account, that entry counted the whole refund as income. Re-enter it the way above (income = interest only, carve-out the principal to the Income Tax account) and your totals will correct themselves.