How to Record Debit Note and Credit Note in Tally Prime (2026)

Returns, price corrections, and post-sale adjustments happen in almost every business, and Tally Prime has a dedicated voucher for each side of that transaction: Debit Notes for purchase returns or supplier corrections, and Credit Notes for sales returns or customer corrections. Recording these properly keeps your books and your GST returns accurate instead of leaving you to “adjust” the next invoice manually.

This guide covers both voucher types, when to use which one, and how GST is treated on each.

What You Need Before You Start

• Tally Prime installed, with your purchase/sales ledgers and party ledgers already set up
• GST enabled, if applicable — see our guide on how to create a GST invoice in Tally Prime
• The original invoice number and date you’re issuing the note against, since GST rules require this reference

Debit Note vs Credit Note: Which One Do You Use?

Use a Debit Note when you are reducing what you owe a supplier — typically because you’re returning purchased goods, or the supplier overcharged you. You’re debiting their account, reducing your payable.

Use a Credit Note when you are reducing what a customer owes you — typically because they returned goods, or you overcharged them on the original sale. You’re crediting their account, reducing what they owe you.

A simple way to remember it: Debit Notes go out to suppliers, Credit Notes go out to customers.

Step 1: Enable Debit and Credit Note Vouchers (If Needed)

These voucher types are available by default in most Tally Prime setups, but if you don’t see them in the voucher list:

1. Gateway of Tally, then F11 (Features), then F1 (Accounting Features)
2. Ensure Use Debit/Credit Notes is set to Yes
3. Press Ctrl+A to save

Step 2: Record a Debit Note (Purchase Return)

1. Gateway of Tally, then Vouchers
2. Press Alt+F5 to switch to Debit Note (or select it from the voucher list)
3. Party A/c Name: select the supplier ledger
4. Enter the original Supplier Invoice Number and Date you’re referencing — this is required for proper GST reporting
5. Select the Purchase ledger and the stock item(s) or service being returned
6. Enter the quantity and rate being reversed
7. Tally Prime recalculates the GST automatically based on the original rate
8. Press Ctrl+A to save

Example: You received 10 units of a product but 2 were damaged. You raise a Debit Note for those 2 units, referencing the original purchase invoice. This reduces what you owe the supplier and adjusts your input tax credit accordingly.

Step 3: Record a Credit Note (Sales Return)

1. Gateway of Tally, then Vouchers
2. Press Alt+F6 to switch to Credit Note
3. Party A/c Name: select the customer ledger
4. Enter the original Sales Invoice Number and Date you’re referencing
5. Select the Sales ledger and the stock item(s) or service being returned
6. Enter the quantity and rate being reversed
7. GST recalculates automatically
8. Press Ctrl+A to save

Example: A customer returns 1 of 5 items they purchased. You raise a Credit Note for that 1 unit, referencing the original sales invoice. This reduces what they owe you and adjusts your output GST liability.

GST Treatment on Debit and Credit Notes

Both voucher types affect your GST liability, not just your accounting books:

• A Credit Note reduces your output tax liability, since you’re effectively reversing part of a sale you already reported
• A Debit Note reduces your input tax credit, since you’re reversing part of a purchase you already claimed credit on

Both need to reference the original invoice they relate to, and both need to be reported correctly in your GST returns for the relevant period. If you issue a note in a later tax period than the original invoice, check current GST rules on the time limits for doing so, since these can change.

Printing and Sharing Debit/Credit Notes

1. From the saved voucher, press Alt+P to print
2. Press F12 to configure what appears — reference invoice number, GST breakup, and reason for the note are all useful to include
3. Output as Printer or PDF to share with the supplier or customer

Common Mistakes to Avoid

• Not referencing the original invoice number — this is required for GST compliance and also makes reconciliation much harder later
• Using a Debit Note when you meant a Credit Note (or vice versa) — remember, Debit Notes go to suppliers, Credit Notes go to customers
• Recording the wrong quantity or rate, which doesn’t match the actual return and throws off both your stock and your tax adjustment
• Forgetting to include the reason for the note (damaged goods, pricing error, etc.), which helps both your own records and the other party reconcile their books
• Not accounting for these notes when filing your GST returns for the period, since they directly affect your reported tax liability

FAQs

Can I issue a Credit Note without referencing an original invoice? You can record one in Tally Prime, but for GST compliance purposes, returns and adjustments should generally reference the original invoice. Always check current GST rules for your specific situation.

Does a Debit Note or Credit Note affect my stock levels? Yes, if you’re using Item Invoice mode and the note involves returned goods, Tally Prime adjusts the stock quantity accordingly.

Can I issue a partial Credit Note for only some items on an invoice? Yes. Select only the specific items and quantities being returned or adjusted rather than the full invoice value.

What’s the difference between a Credit Note and a Sales Return voucher? In Tally Prime, the Credit Note voucher is generally used to record sales returns and post-sale price adjustments — there isn’t a separate, distinct “Sales Return” voucher type alongside it.

How do Debit and Credit Notes show up in my GST reports? They appear in the relevant GST reports as adjustments to your output or input tax, alongside your regular sales and purchase entries, as long as they’re recorded with the correct reference details.