What is withholding tax?

[Vpaunuares]

I keep hearing the term what is withholding tax, especially when it comes to payroll, freelancing, investments, or cross-border payments, but I’m still not totally sure how it works. From what I understand, withholding tax is money taken out of your income before you receive it, so the government can collect taxes upfront instead of waiting until tax season. But how is the amount decided? Does everyone pay the same rate, or does it depend on income, country, or type of payment? And if too much is withheld, do you get a refund later?

 

[Muichiro]

Withholding tax is a portion of an employee's salary or a payment to a contractor that is deducted by the payer and sent directly to the government as advance payment of income tax. It ensures tax collection at the source, helping individuals and businesses meet their tax obligations.

 

[Jarwish]

Withholding tax is the portion of an employee’s income that an employer deducts and pays directly to the government, covering income tax or other mandatory taxes on earnings.

 

[nikhilrajoria]

The part of income, which employers automatically deduct and remit to the government as advance tax on the earnings is known as withholding tax.