diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index 0c8bbad5d1e4cf6a47602a534ada636985a1c204..f17cedccd2138401f167d2ac1cd795e85e8d5818 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -771,7 +771,6 @@ 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
@@ -999,19 +998,19 @@ 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):