Withholding at the time of invoice OR payment


Withholding (WTH) tax can be applied either at the time of invoice or at the time of payment.

Let's take below example and try to understand the accounting entry in both scenarios

1) When WTH tax at the time of invoice

2) When WTH tax at the time of payment

 

Company purchased raw material worth 1000, input tax 20% and WTH tax applicable 10%

WTH at the time of invoice

WTH tax is calculated and posted at the time of invoice itself.

withholding-at-the-time-of-invoice

 

WTH at the time of payment

WTH tax is calculated and posted at the time of payment, not at the time of invoice.

withholding-at-the-time-of-payment

In India, withholding tax is applied on gross amount and at the time of payment.