Q. 01. Why have withholding of income tax on contractors?

Why have withholding income tax provisions on contractors been introduced when contractors already pay income tax?

Ans: Withholding tax on contractors is not a new tax or additional tax on contracts. It is advance income tax payable at source as against lump sum payment of tax at the time of filing annual income tax return. The provisions shall facilitate the compliant taxpayers to discharge their tax liability on the principle “pay as you earn”. The tax deducted at source is adjustable against total tax chargeable on the net profits of the registered contractors for the tax year and final tax for contractors doing contract business without a business license or contrary to approved by-law.