Tax Withholding Category is Tax Deducted at Source.

According to this, a person responsible for making payments is required to deduct tax at source at prescribed rates. Instead of receiving tax on your income from you at a later date, the govt wants the payers to deduct tax beforehand and deposit it with the government.

To access the Tax Withholding Category list, go to:

Home > Accounting > Taxes > Tax Withholding Category

1. Prerequisites

Before creating and using a Tax Withholding Category, it is advised to create the following first:

1. Supplier
2. Customer

2. How to create a Tax Withholding Category

In ERPNext, Tax Withholding Categories for most cases are available by default, however, you can create more if needed.

1. Go to the Tax Withholding Category list and click on New.
2. Enter a unique name, eg: Section 194C Individual.
3. Enter a Category Name (Dividends, Professional Fees, etc,.).
4. Enter a Tax Withholding Rate against a Fiscal Year.
5. You can set the threshold for a single invoice or sum of all invoices.</