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Withholding Tax in India

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Aakash (Quicko Customer Success Representative)

NRI Taxpayers
TDS Due Date
TDS Rates
Withholding Tax
Last updated on September 22nd, 2021

Any payer deducting an amount directly from its payee’s earning is referred to as Withholding tax. By law, the payer is obliged to deduct the amount at the time of making the payment on account of a Non-Resident Individual. Let’s learn about withholding taxes in further detail.

What is Withholding tax

Withholding tax is similar to Tax Deducted at Source (TDS). Withholding tax also known as retention tax is another terminology used for TDS. It is deducted by the payer directly from its payee’s earning. This tax is then deposited as part of the Non- resident individual’s tax liability to the Central government of India. The central government of India is an official body to levy and collect taxes.

For better understanding, TDS has to be paid by Residents, and withholding tax is to be paid by Non-resident individuals only on income earned in India.

Example: Mr. Rohan is an NRI and is working as a freelancer with Mr. Shah & Co. in India. Mr. Rohan has earned INR 95000 by providing his services. Now, while making the payment Mr. Shah & Co. will credit INR 90000 to Mr. Rohan’s account and deduct INR 5000 as withholding tax.

Rates of Withholding tax in India

Following are the rates applicable for Non- Resident Indian individuals:

Note: The above stated rates are applicable on those countries with whom India does not have a double taxation avoidance agreement.

Process of doing an assessment for Non-resident Indians

Assessment of Non- Resident Indians can be done by an agent or even directly. A person who is considered as ‘agent‘ of a non-resident assessee is as under:

Due date of Filing returns

The returns for withholding of tax are filed quarterly, and it includes details about every payee and amount deducted for that particular quarter.

Following are the dates of filing the returns for every quarter:

Quarter Months Due Dates
Q1 April – June July 15th, 2021
Q2 July – September October 15th, 2021
Q3 October – December January 15th, 2021
Q4 January – March  May 15th, 2021

Due date of depositing payment

Following are the due dates of making payments of withholding tax:

Month End of Quarter Withholding Tax Payments Due Date – Government  Withholding Tax Payments Due Date – Non- Government 
January 31st March 7th February 7th February
February 31st March 7th March 7th March
March 31st March 7th April 30th April
April 30th June 7th May 7th May
May 30th June 7th June 7th June
June 30th June 7th July 7th July
July 30th September 7th August 7th August
August 30th September 7th September  7th September 
September 30th September 7th October 7th October
October 31st December 7th November 7th November
November 31st December 7th December 7th December
December 31st December 7th January 7th January

FAQs

What is the difference between TDS and withholding tax?

TDS is applicable while making payments to Indian Citizens while Withholding tax is applicable while making payments to foreign individuals.

What is the rate of withholding tax in India?

Following are the rates applicable for Non- Resident Indian individuals:
1. 20% Interest rate is applicable for dividends paid by domestic companies
2. 10% rate is applicable for technical services are charged
3. 10% rate is applicable for other services
4. Individuals are charged a 30% rate of the Income
5. Companies are charged 40% rat of the Income
6 . No tax charged for royalties

When should I make payment for withholding tax?

Withholding tax payment has to be done on the 7th of every month. While returns are to be filed within 30 days from the ending of every quarter.

Got Questions? Ask Away!

  1. Hey @Joe_Fernandes ,

    Thank you for reaching out to us!

    You need to keep in mind following dates for TDS Return filing:

    Penalty Under Section 234E is levied in case you miss out on filling TDS return on time. The penalty of INR 200 per day is levied on the taxpayer till the day on which return is filed. Provided that the amount of Penalty should not exceed the number of TDS payable.

    Hope this helps!