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Tax withholding, also known as tax retention, pay-as-you-earn tax or tax deduction at source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient.
Forty-two states and some localities in the United States levy a state income tax on individuals, while forty-seven states tax the income of corporations. For federal individual (not corporate) income tax, the average rate paid in 2020 on Adjusted Gross Income (income after deductions) was 13.6%. [1]
Tax deduction at source (TDS) is an Indian withholding tax that is a means of collecting tax on income, dividends, or asset sales by requiring the payer (or legal intermediary) to deduct tax due before paying the balance to the payee (and the tax to the revenue authority).
During 1936 the United States adopted the British system of deduction-at-source. This was extended to include dividends, interest, rent, wages and salaries paid by corporations. This system was short-lived as it was soon to be replaced by the system of information-at-source.
This means that the UK income tax liability of an individual who is neither resident nor ordinarily resident in the United Kingdom is limited to any tax deducted at source on UK income, together with tax on income from a trade or profession carried on through a permanent establishment in the UK and tax on rental income from UK real estate.
A tax deduction is allowed at the federal, state and local levels for interest expense incurred by a corporation in carrying out its business activities.
Income tax is generally collected in one of two ways: through withholding of tax at source and/or through payments directly by taxpayers. Nearly all jurisdictions require those paying employees or nonresidents to withhold income tax from such payments.
A rate schedule is a chart that helps United States taxpayers determine their federal income tax for a particular year. [1] [2] Another name for "rate schedule" is "rate table". [1]
A tax deduction or benefit is an amount deducted from taxable income, usually based on expenses such as those incurred to produce additional income. Tax deductions are a form of tax incentives , along with exemptions and tax credits .
In the United States income tax system, adjusted gross income (AGI) is an individual's total gross income minus specific deductions. It is used to calculate taxable income , which is AGI minus allowances for personal exemptions and itemized deductions .