Withholding Tax

Withholding tax is a direct tax deducted at source by the payer on specific types of payments. The payer remits the withheld amount to the relevant tax authority on behalf of the payee.

In Zoho Invoice, you can enable withholding tax, apply it to invoices and bills at the line-item level, and record payments that account for the withheld amount.

Enable Withholding Tax

Before applying withholding tax to your transactions, you need to enable it.

Here’s how:

Go to Settings and select Withholding Tax.
Navigate to Withholding Tax Settings.
Enable the toggle next to Do you want to enable Withholding Tax?.
Click Save.

Withholding tax will now be enabled for your organisation.

Create a Withholding Tax Rate

To create a withholding tax rate:

Go to Settings and select Withholding Tax.
Navigate to Withholding Tax Rates.
Click + New Rate.
In the pop-up, enter the Withholding Tax Name and Withholding Tax Rate.
Select the Tax Type.
Click Save.

You can now use this withholding tax rate in transactions.

Enable Withholding Tax for Customers

To enable withholding tax for a customer:

Go to Customers on the left sidebar.
Create a new customer or edit an existing customer.
In the Other Details section, check the Enable Withholding Tax for this Customer option.
Click Save.

Apply Withholding Tax to Invoices

When you create an invoice for a customer with withholding tax enabled, you can apply a withholding tax rate to each line item.

To apply withholding tax to invoices:

Go to Invoices on the left sidebar.
Create a new invoice or edit an existing invoice.
In the Items table, choose the applicable Withholding Tax for each line item in the TDS column.
Review the Withholding Tax section below the total.
Click Save and Send or Save as Draft.

The invoice will be saved with withholding tax details.

Record Withholding Tax Payment

After applying withholding tax to invoices, you can record the withheld amount while recording payment.

Record Invoice Payment with Withholding Tax

Go to Invoices on the left sidebar.
Open the invoice for which you want to record payment.
Click Record Payment.
Enter the payment details.
Select Yes next to Withholding Tax Deducted?.
Verify the Withholding Tax Amount displayed.
Click Save as Paid.

Apply Withholding Tax to Bulk Customer Payments

When a customer pays multiple invoices in one payment, you can apply withholding tax invoice-wise in the same payment.

Go to Payments Received on the left sidebar.
Click + New or edit an existing payment.
Enter the required details.
Under Unpaid Invoices, review withholding tax due in the Withholding Tax column.
Click Add Withholding Tax to include deductions.
Enter payment amounts for the invoices.
Click Save.

The payment will be recorded with withholding tax applied for the selected invoices.

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