diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index 66c82be596c..b89854b172a 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -874,19 +874,19 @@ class PaymentEntry(AccountsController):
 		)
 
 		base_party_amount = flt(self.base_total_allocated_amount) + flt(base_unallocated_amount)
-
-		if self.payment_type == "Receive":
-			self.difference_amount = base_party_amount - self.base_received_amount
-		elif self.payment_type == "Pay":
-			self.difference_amount = self.base_paid_amount - base_party_amount
-		else:
-			self.difference_amount = self.base_paid_amount - flt(self.base_received_amount)
-
-		total_deductions = sum(flt(d.amount) for d in self.get("deductions"))
 		included_taxes = self.get_included_taxes()
 
+		if self.payment_type == "Receive":
+			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 - included_taxes
+		else:
+			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"))
+
 		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):