Deduction At Source | Law

Concept of deduction at source

It is necessary for certain persons to deduct or recover the amount of tax payable by tax payer and deposit this amount with tax authorities.Such deductions are known as deductions at source.A deduction at source is a method of the collection of tax on income.

        Importance of deduction at source

Deduction of tax makes collection of tax easy and saves time for filing return.

Following principles are laid down for deduction on income tax.

i- Expenditure should be from tax payer

ii- Expenditure should be in that particular income year

Deduction at source and tax collection

Cases of deduction at source

Part v chapter x has specified the following cases where tax shall be deducted.

It is necessary for employer to deduct the tax from taxable salary of every employee. All resident companies are requiring deducting the tax while paying dividends to any person. Every person is required to deduct the tax from the amount paid to non-resident for their resident. Every person is required to deduct the tax from the amount paid on account of supply of goods and services.

 A person is required to deduct the amount of tax out of the amount of rent if it is paid on behalf of,

i- Government

ii- Local authorities

iii- Company

iv- N G O

Table of deduction at source

It is the tax laws to deduct the income of the tax paye. It is the principal of the income tax ordinance . NAB court has authority to decision the latest cases.

An authorized dealer in foreign exchange is required to deduct the tax on exports at the time of foreign exchange. Every person while paying an amount of prize or prize bound is required to deduct the tax. Every person is required while selling petroleum products to deduct 10% of tax.

Following are the advantages of collection of tax by deduction.

i- Chances of evasion of income tax are minimizes

ii- Lengthy recovery proceedings are avoided

iii- Speedy collection of tax

iv- In time payment of tax