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Withholding tax is a type of income tax deduction. It helps people to pay tax on all their income, not just salary or wages.

When someone earns income from interest, contract work or other sources that are not salary or wages, there are some situations when the payer must withhold tax from that income and pay it to us on the person's behalf.

For example, a bank deducts resident withholding tax (RWT) from interest it pays to investors, or a company deducts withholding tax from schedular payments it pays to contractors.