diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index 9afe9c957af77f091ea7f1d31529abde58e2d1d8..2e564b802ef40efa89d9ebcdd468222d7c89c6d5 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -772,7 +772,6 @@ class PaymentEntry(AccountsController):
 		self.base_in_words = money_in_words(base_amount, self.company_currency)
 		self.in_words = money_in_words(amount, currency)
 
-
 	def set_tax_withholding(self):
 		if self.party_type != "Supplier":
 			return
@@ -1003,19 +1002,19 @@ class PaymentEntry(AccountsController):
 		)
 
 		base_party_amount = flt(self.base_total_allocated_amount) + flt(base_unallocated_amount)
+		included_taxes = self.get_included_taxes()
 
 		if self.payment_type == "Receive":
-			self.difference_amount = base_party_amount - self.base_received_amount
+			self.difference_amount = base_party_amount - self.base_received_amount + included_taxes
 		elif self.payment_type == "Pay":
-			self.difference_amount = self.base_paid_amount - base_party_amount
+			self.difference_amount = self.base_paid_amount - base_party_amount - included_taxes
 		else:
-			self.difference_amount = self.base_paid_amount - flt(self.base_received_amount)
+			self.difference_amount = self.base_paid_amount - flt(self.base_received_amount) - included_taxes
 
 		total_deductions = sum(flt(d.amount) for d in self.get("deductions"))
-		included_taxes = self.get_included_taxes()
 
 		self.difference_amount = flt(
-			self.difference_amount - total_deductions - included_taxes, self.precision("difference_amount")
+			self.difference_amount - total_deductions, self.precision("difference_amount")
 		)
 
 	def get_included_taxes(self):