What is Withholding Tax, Charges & Filing Due Dates ?

Withholding Tax

The tax which is deducted by the payer of the income is said to be as the withholding tax. Retention tax is also known as withholding tax. This tax is depended on the person’s residential status. The total amount which is taxable is deducted by the payer at the source under this withholding tax. It makes us clear that before paying the salary or before making the payment to the payee the payer will only deduct the withholding amount of the payee from the income.

It is similar to the tax deduction at the source. Many people think that the terminology for TDS Tax Deducted at Source outside India is withholding tax. But they are wrong there are some differences between withholding tax and TDS. By following the below content you will get to know the complete details about the withholding tax.

Withholding taxes are applicable to various sources of income such as professional services, business income, technical services, salary, contract work, rent, interest, commission, etc. This content contains information about-

  • Withholding tax
  • Why this tax is charged and what are the charges of withholding tax?
  • Withholding tax rates
  • Difference between TDS and withholding tax?
  • The due date for withholding tax payment?
  • Filling due dates for withholding tax?
  • Certificate for withholding tax.

Withholding Tax

To the non-residential individual, only the chargeable payment is done. The important thing to be noted is that only on the chargeable income only the payment is taxable. If the payment of the individual will not fall under the tax limits then they are exempted from the payment and deduction of the tax. The individuals can make an application to the assessing officer; this application can be made to get the details about the retention tax to be deducted, which is the exact chargeable portion. For the services, who makes the payment from a non-resident can deduct withholding tax. To deduct the withholding tax is obligatory as the part of the payee. According to the Double Taxation Avoidance Agreement which is applicable for the non-residential only, this tax has to be deducted.

Why this tax is charged and what are the charges of Retention tax?

Charging this tax, two major benefits are there. Here are those benefits. The early generation of revenue is the primary beneficiary. The payee will deposit the amount to the government when the withholding tax will deduct the amount of tax at the time of payment. The government needs not to have to wait for the end of the year for receiving the tax amount because in the early generation the payment is quick for the government. Charging the tax’s second beneficiary thing is the transactions will be under scrutiny and radar.

It is the duty of the payee to deduct the tax and deposit it to the government on time. Even the payer has to ensure that the charged amount for the tax is correct or not and also have to check that the deposited tax amount is the same amount or not. Along with this the most important benefit of the withholding tax is the evasion of tax is not possible. The tax evasion is controlled by this tax in this both the payer and payee have to pay off the deducted tax to the government.

Withholding tax rates

  • For the dividends, the interest charged is 20% which is paid by the domestic companies, and tax is not charged.
  • For Royalties, it is 10%
  • Technical services are charged at 10% for other services.
  • Individuals are charged at 30% of the income.
  • Companies are charged at 405 of the income.

These are applicable to countries with which India is not having the DTAA Double Taxation Avoidance Agreement.

Difference between TDS and Retention tax?

At first, by observing the Retention tax and TDS we think that both are the same but there is a difference between these two. Let’s know here what the difference here is. Withholding tax is the amount that is deducted before paying the payment to the employee by the payee and this deducted amount will be paid as tax to the government. But the TDS Tax Deducted at Source is the amount which is deducted at the time of paying the payment to the professionals, contractors, etc. Withholding tax is applicable to non-residents for payments whereas TDS is for the Indian people.

To know it easily here is the example to apply the withholding tax when making the payment to the foreign vendors and apply the TDS while making the payment to the vendors.

The due date for the Retention of tax payment?

Except for the March month in which the withholding tax payment due date is 30th April. The tax is deducted is to be paid by the 7th day of the month.

Filling due dates for Retention tax?

  • Particulars Form 24Q and 26Q
  • Form 27Q
  • Form 27EQ
  • 1st Quarter (April-June) 15th July
  • 2nd Quarter (July-Sep) 15th Oct
  • 3rd Quarter (Oct-Dec) 15th Jan
  • 4th Quarter (Jan-March) 15th May
  • Quarterly these returns are filed. These filed returns hold details of every payee along with the tax deducted for the particular quarter.
  • The above given are the dates of filing the returns.

Certificate of withholding tax.

Every quarterly the tax certificate has to be given by the payer to the payee. By visiting the TRACES web portal you can get the withholding tax deduction certificate.