How to pass the interest collection entry for Fixed deposit along with the TDS deduction?

When managing fixed deposits (FDs) in accounting, interest income is often subject to Tax Deducted at Source (TDS). Passing an entry for interest collection on a fixed deposit, along with the corresponding TDS deduction, ensures accurate financial reporting and compliance with tax regulations. This process involves recording both the interest income earned and the TDS withheld by the bank or financial institution. Properly accounting for these transactions helps maintain transparency and ensures that the net interest income, after tax deductions, is accurately reflected in the books. 

Below is a step-by-step guide on how to pass the interest collection entry along with the TDS deduction for fixed deposits.

While collecting interest as mentioned in #2 above, mention the full amount, including TDS. Then, create a journal voucher as mentioned below to show the adjustment of TDS receivable.

Accounts → Vouchers → Create Voucher → Select date and input description same as interest collected date → Select debit account as “TDS Receivable” → Select credit account as “FD  ledger” → Input TDS deducted amount → Save

*If it is a simple interest FD, use the bank ledger (cr) instead of the FD ledger in the above step.