Hello @Lakna K 

Payment tolerance is used to automate write-off transaction. In case the customer does not pay full amount of invoice and you want write-off remaining amount then you can define a rule. Example

Your invoice is 1110 USD and you have defined %1 tolerance. If you receive 1100 USD payment, system will create a write off transaction for 10 USD automatically based on the rule. Because tolerance amount is 11.10 USD.

If you define a tolerance amount this decide how much USD you can write off. If you enter 5 USD then based on example above system will not create a write off because tolerance 11.10 USD is higher than maximum tolerance amount 5 USD.

I am copying you help description for both field

Tolerance %:

The percentage tolerance based on invoice amount. The tolerance percentage is used for automatic write-off at customer payments.

Tolerance Amount:

The maximum amount tolerance accepted for automatic write-off for each customer payment.

Hope this helps