Responsibilities of withholding entities and taxpayers as per ITA 2023
Nazmul Alam
September 02, 2023
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When a business makes a payment for an expenditure, it is obligated to deduct or collect tax at the source for certain types of products and services (discussed in Section 86 to Section 139). Conversely, when a business receives payment from its clients, the amount received could be less than the bill amount due to tax deductions made by the client. In this context, the payer is the withholding entity and the receiver is the taxpayer.
There are certain responsibilities for the payer (withholding entity) as well as for the receiver (taxpayer) as per Income Tax Act 2023.
⬇️ Responsibilities of withholding entities ⬇️
- (1) Deduct/Collect tax as per Section 86 to 139 of Part 7 of ITA 2023
- (2) Deposit deducted/collected tax in government treasury using TR-6 Form as per Rule 8 and Rule 9 of Withholding Tax Rules 2023
- (3) Prepare and submit monthly TDS return as per Rule 13 of Withholding Tax Rules 2023
- (4) Prepare and submit TDS certificates as per Rule 10 of Withholding Tax Rules 2023
⬇️ Responsibilities of taxpayers ⬇️
On the contrary, as a receiver (taxpayer) of payments, there are certain responsibilities as well. Before we dig down to the responsibilities, we need to consider 2 scenarios where (a) the withholding entity has deducted / collected tax; and (b) the withholding entity did not deduct / collect tax.
- (1) If the withholding entity has deducted / collected tax
- Collect TR-6 form (treasury challans) from the payer (withholding entity) if any tax has been deducted/collected at source
- Collect TDS certificates from the payer if any tax has been deducted/collected at source. This is crucial because as per Section 158 of ITA, such deducted/collected tax at source shall be deemed to be paid on the income earned for that period and as such shall be excluded from the tax payable amount by the receiver.
- (2) If the withholding entity did not deduct / collect tax, According to the Section 151 of ITA 2023, the taxpayer is liable to pay taxes if and only if:
- no tax is deducted or collected by the payer (withholding entity) as per the Part 7 of ITA 2023; or
- the amount of tax deducted or collected is less than the applicable rate as per Part 7 of ITA 2023
⬇️ Consideration of minimum tax ⬇️
In either case, the taxpayer needs to keep in mind that, according to the Section 164 of ITA 2023, where tax is deducted or collected in excess of the correct amount, such excess deduction or collection shall not be considered for the purpose of calculating the minimum tax under Section 163.
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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