WITHHOLDING TAX Meaning and
Definition
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Withholding tax refers to a government-imposed tax that is deducted or withheld by an employer or other withholding agent from an employee's wages or income before it is paid to them. It is a form of advance payment of income tax or other taxes that may be due based on the individual's total annual income.
The purpose of withholding tax is to ensure that individuals pay their taxes throughout the year rather than waiting until the end of the year to settle their tax liabilities. It is a method employed by governments to collect taxes from individuals in a timely manner, without requiring them to make lump sum payments.
The amount of withholding tax deducted from an individual's wages is typically determined by their level of income, as well as factors such as their filing status and number of dependents. The tax is calculated based on the applicable tax rates and tax brackets established by the tax authorities.
Withholding tax applies not only to employment income but also to other types of income, such as dividends, interest, and royalties. In some jurisdictions, non-residents may be subject to withholding tax on income earned within that jurisdiction. However, some countries have tax treaties that provide relief or reduced rates for withholding tax on certain types of income for non-residents.
The amount of withholding tax deducted from an individual's income is treated as a credit against their total tax liability when they file their annual tax return. If the withholding tax exceeds the tax liability, a refund may be issued. Conversely, if the withholding tax is lower than the tax liability, additional tax may be owed.
Common Misspellings for WITHHOLDING TAX
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Etymology of WITHHOLDING TAX
The word "withholding tax" is derived from combining two words - "withhold" and "tax". Here is the etymology of each word:
1. Withhold:
The word "withhold" originated in the Old English language, where it was known as "wiðhaldan". It is a combination of "wið" meaning "against" or "away", and "haldan" which means "to hold" or "to keep". Over time, "wiðhaldan" evolved into "withhold" in Middle English, carrying the sense of "to hold back" or "to refuse to give".
2. Tax:
The word "tax" traces its roots back to Latin. In Latin, "taxare" means "to evaluate" or "to estimate", which was used particularly in the context of public revenue.
Similar spelling word for WITHHOLDING TAX
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