diff --git a/erpnext/controllers/buying_controller.py b/erpnext/controllers/buying_controller.py
index 67ccc4c7fe4..6383049be9c 100644
--- a/erpnext/controllers/buying_controller.py
+++ b/erpnext/controllers/buying_controller.py
@@ -503,11 +503,15 @@ class BuyingController(SubcontractingController):
 			if d.category not in ["Valuation", "Valuation and Total"]:
 				continue
 
+			amount = flt(d.base_tax_amount_after_discount_amount) * (
+				-1 if d.get("add_deduct_tax") == "Deduct" else 1
+			)
+
 			if d.charge_type == "On Net Total":
-				total_valuation_amount += flt(d.base_tax_amount_after_discount_amount)
+				total_valuation_amount += amount
 				tax_accounts.append(d.account_head)
 			else:
-				total_actual_tax_amount += flt(d.base_tax_amount_after_discount_amount)
+				total_actual_tax_amount += amount
 
 		return tax_accounts, total_valuation_amount, total_actual_tax_amount
 
diff --git a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
index 74cdfb38f78..6eba41c3883 100644
--- a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
+++ b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
@@ -1240,6 +1240,65 @@ class TestPurchaseReceipt(ERPNextTestSuite):
 
 		pr.cancel()
 
+	def test_item_valuation_with_deduct_valuation_and_total_tax(self):
+		pr = make_purchase_receipt(
+			company="_Test Company with perpetual inventory",
+			warehouse="Stores - TCP1",
+			supplier_warehouse="Work In Progress - TCP1",
+			qty=5,
+			rate=100,
+			do_not_save=1,
+		)
+
+		pr.append(
+			"taxes",
+			{
+				"charge_type": "Actual",
+				"add_deduct_tax": "Deduct",
+				"account_head": "_Test Account Shipping Charges - TCP1",
+				"category": "Valuation and Total",
+				"cost_center": "Main - TCP1",
+				"description": "Valuation Discount",
+				"tax_amount": 20,
+			},
+		)
+
+		pr.insert()
+
+		self.assertAlmostEqual(pr.items[0].item_tax_amount, -20.0, places=2)
+		self.assertAlmostEqual(pr.items[0].valuation_rate, 96.0, places=2)
+
+		pr.delete()
+
+		pr = make_purchase_receipt(
+			company="_Test Company with perpetual inventory",
+			warehouse="Stores - TCP1",
+			supplier_warehouse="Work In Progress - TCP1",
+			qty=5,
+			rate=100,
+			do_not_save=1,
+		)
+
+		pr.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"add_deduct_tax": "Deduct",
+				"account_head": "_Test Account Shipping Charges - TCP1",
+				"category": "Valuation and Total",
+				"cost_center": "Main - TCP1",
+				"description": "Valuation Discount",
+				"rate": 10,
+			},
+		)
+
+		pr.insert()
+
+		self.assertAlmostEqual(pr.items[0].item_tax_amount, -50.0, places=2)
+		self.assertAlmostEqual(pr.items[0].valuation_rate, 90.0, places=2)
+
+		pr.delete()
+
 	def test_po_to_pi_and_po_to_pr_worflow_full(self):
 		"""Test following behaviour:
 		- Create PO