Withholding Tax compliance in 5 steps

Nazmul Alam

August 03, 2023

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In countries like Bangladesh withholding tax plays a critical role for the government to collect taxes. It also acts as a mechanism to distribute the responsibility of tax payment between the payer and the recipient. As per ITA 2023, withholding entities are required to deduct/collect taxes for a certain number of products and services when making payments to vendors. This collection/deduction process involves 5 steps, which are as follows:
  • 🔎 Step 1: Identify the Withholding Tax Liability (Part 7 of ITA 2023): The first step is to identify the transactions or payments that are subject to withholding tax as per the provision of the act. This includes determining the type of payment, the applicable rate of withholding tax, and the relevant provisions of the Income Tax Act.
  • 📟 Step 2: Deduct/Collect tax (Part 7 of ITA 2023): Once the withholding tax liability is identified, the next step is to calculate the amount of tax to be withheld. The calculation is usually based on the payment amount and the applicable withholding tax rate.
  • 🏦 Step 3: Deposit deducted / collected tax in government treasury (Rule 8 & Rule 9 of ITA 2023): After deducting the withholding tax from the payment, the payer is required to remit the withheld tax amount to the government within the specified timeframe through A-challan or e-payment as prescribed by the Board.
  • 📜 Step 4: Prepare and submit monthly TDS return (Rule 13 of ITA 2023): The payer has to prepare a withholding tax return every month for the tax amount deducted or collected. The return should be submitted to the Commissioner of Excise within the specified jurisdiction and must include all prescribed details, documents, and information.
  • ⚖️ Step 5: Prepare and submit TDS certificates (Rule 10 of ITA 2023): The payer provides a withholding tax certificate to the recipient (the person receiving the payment), which confirms the amount of tax withheld. This certificate serves as evidence of tax deduction and can be used by the recipient for tax purposes.
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Nazmul Alam

Nazmul is a full-stack developer and a chartered accountant. He is a self-motivated, dynamic and professional individual with more than 4 years of experience in corporate finance and business advisory in one of the Big 4 audit & advisory firm, KPMG in Bangladesh.

He specializes in Finance & Technology and develops data-driven web and app-based business solutions for C-Suite. These solutions use agile methodologies and languages & frameworks such as JavaScript, Node.JS, Express.JS, Next.JS, and MongoDB.

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