Answer Posted / arunsidharthan
Withholding tax is the amount withheld by the party making
a payment to another (payee) and paid to the taxation
authorities. The amount the payer deducts may vary,
depending on the nature of the product or service being
paid for. The payee is assessed on the gross amount, and
the tax to be withheld (the withholding tax) is computed in
that assessment. The purpose of withholding tax is to
facilitate or accelerate collection, by collecting tax from
payers rather than a much greater number of payees, and by
collecting tax from payers within the jurisdiction rather
than payees who may be outside the jurisdiction. It may
also be used to counteract tax evasion and tax avoidance.
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