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Customers pay net of TDS, and tools that match only two of bank credit, invoice and credit statement either close receivables too early or misread TDS as short payment.
Link all three legs and give each line a status: matched, waiting for credit or short payment, until the credit statement confirms the TDS part.
Five test receipts covering exact TDS cut, lower-deduction rate, one payment for several invoices, TDS on GST-inclusive amount and payment before the deductor files.
Evidence of whether a tool keeps the TDS part open until credit appears and flags real short payments.
When a customer pays ₹2,21,400 against a ₹2,46,000 invoice because it deducted 10 percent TDS (₹24,600), three records describe one event: the bank credit, the invoice and, later, the Form 168 line. A reconciliation tool should link all three and keep the ₹24,600 open as TDS receivable until the credit shows. These five test receipts tell you whether it does.
For how the matching works in practice, see invoice matching net and gross of TDS and the bank side in the days 1-5 bank reconciliation runbook.
Why do two-way tools stop short?
- Credit statement against ledger, no bank leg. The tool sees ₹24,600 TDS credit but cannot tell whether the ₹2,21,400 was received in full, or whether the customer also short-paid ₹5,000 for a dispute.
- Bank against invoice, no credit statement. The tool sees ₹2,21,400 against ₹2,46,000 and either marks a ₹24,600 short payment or closes the invoice by assuming TDS. If the deductor never files, that assumed credit is lost and nobody chases it.
Only the three-way link gives the right answer: cash matched, TDS part waiting for credit.
What five test receipts should you use?
- Exact TDS cut. Invoice ₹2,46,000; receipt ₹2,21,400 (10 percent under Section 194J, or payment code 1027 from April 2026).
- Lower-deduction rate. Invoice ₹1,00,000; the customer holds a lower-deduction certificate at 2 percent and pays ₹98,000.
- One payment, several invoices. One NEFT covering three invoices after TDS.
- TDS on GST-inclusive amount. Invoice ₹1,00,000 plus 18 percent GST, total ₹1,18,000. Per CBDT Circular 23/2017, TDS at 10 percent should be ₹10,000 on the pre-GST value; the customer deducts ₹11,800 on the total and pays ₹1,06,200.
- Payment before the deductor files. Receipt arrives in May; the deductor’s quarterly statement is not yet filed, so no credit line exists.
What should a pass look like?
| Scenario | Bank credit | Invoice | Expected credit line | Expected status | Red flag |
|---|---|---|---|---|---|
| 1 Exact TDS cut | ₹2,21,400 | ₹2,46,000 | ₹24,600 | Cash matched; TDS waiting for credit | Shown as fully matched on day one |
| 2 Lower rate | ₹98,000 | ₹1,00,000 | ₹2,000 | Matched against certificate rate | ₹8,000 short payment reported |
| 3 Several invoices | ₹3,15,000 | Three invoices, ₹3,50,000 | ₹35,000 across three lines | Each invoice split and waiting for credit | Lump sum left unapplied |
| 4 GST-inclusive TDS | ₹1,06,200 | ₹1,18,000 | ₹11,800 | Matched, ₹1,800 excess deduction flagged | Silent acceptance |
| 5 Before filing | Any | Any | None yet | Waiting for credit, review date set | Short payment or write-off |
Give the vendor the bank lines, invoices and, for scenarios 1 to 4, a credit statement extract. For scenario 5, give no credit line and see what the tool does.
How should the multi-invoice case resolve?
Invoices of ₹1,00,000, ₹2,00,000 and ₹50,000 total ₹3,50,000. At 10 percent, TDS is ₹35,000, and the customer sends one NEFT of ₹3,15,000.
| Invoice | Gross | TDS (10 percent) | Cash applied | Status until credit shows |
|---|---|---|---|---|
| A | ₹1,00,000 | ₹10,000 | ₹90,000 | Waiting for credit |
| B | ₹2,00,000 | ₹20,000 | ₹1,80,000 | Waiting for credit |
| C | ₹50,000 | ₹5,000 | ₹45,000 | Waiting for credit |
| Total | ₹3,50,000 | ₹35,000 | ₹3,15,000 |
When the Form 168 line for ₹35,000 appears, all three move to matched. If it shows ₹30,000, one invoice stays open with “credit lower than books” and goes to follow-up.
What should you ask the vendor after the test?
- How long does a line stay in “waiting for credit” before it escalates? A sensible rule ties the review date to the deductor’s statement due date, plus time for processing, rather than a fixed number of days.
- Can the expected rate be set per customer? Needed for lower-deduction certificates and for customers who deduct under a different section from the one you expect.
- How is a real short payment separated from a TDS cut? If a customer pays ₹2,16,400 on the ₹2,46,000 invoice, the tool should show ₹24,600 waiting for credit and ₹5,000 short payment, not one ₹29,600 gap.
- What happens when the credit arrives in a later quarter? The line should close against the later credit and keep both dates.
- Can the receivables team see the TDS status without a tax-team login? Collections calls go wrong when the caller cannot see that the gap is TDS.
Write the answers down next to the five scenario results. A tool can pass the scenarios on a demo day and still be hard to run every month if these rules are not settings your team controls.
How do you use this test?
Run it inside a wider pilot, not as a separate exercise; the pilot guide shows how. A tool that fails scenarios 1 or 5 will overstate cleared receivables every month. For the process background, see automating TDS reconciliation.
How Terra Insight fits
TransactIG’s TDS reconciliation covers the receivable side, matching Form 26AS, Form 168 and AIS against your TDS receivable ledger, and its bank-to-books reconciliation matches bank lines to the books with an exception queue and audit-ready exports. Bring these five receipts to a representative-sample fit benchmark. If a credit stays short, see the Form 168 shortfall guide.