what is with holding tax

[RAJAT BAJPAI]

Dear Sir,

1. What is with holding tax?  2.  How are the rates of taxes applied under DTAA.

3 .How is the Taxable turnover determined for income tax purposes.

[Mukesh Kumar]

Withholding Tax is nothing but a tax which is deducted at source by the person making payment to other party. In general this term is used for overseas payment where the person making payment is required to deduct tds u/s 195 of the income tax. Since the provisions of DTAA notified in pursuance of power u/s 90 have overriding effect it is prescribed that most beneficial provisions are applicable for the purpose of taxation. 

Therefore, to apply the provisions of DTAA, it is required to understand the DTAA as a whole, the scope of DTAA and nature of income subject to DTAA than only one can apply the provisions of DTAA correctly.

'Taxable Turnover' is a general term which is found under section 44AB read with section 145A of the Income Tax Act. But, before that, general account principals to be applied to determine the taxable turnover of the business.

AI Summary

Withholding tax requires deduction at source for cross border payments; DTAA terms govern applicable rates and relief. Withholding tax requires the payer to deduct tax at source from payments, especially for cross border payments, and applicable rates and obligations must be determined by reference to domestic law and any overriding treaty provisions, applying the most beneficial treaty terms after analysing the treaty's scope and the nature of the income. Taxable turnover for income tax purposes is derived by applying general accounting principles together with statutory rules that define turnover for tax computation and audit purposes to determine the business's taxable turnover.