Payroll Tax

1. Deductions From An Employee’s Salary: This category of payroll tax is tax that an employer is required to withhold from his or her employee’s salary or wages. This tax is also known as withholding tax and can be used to cover advance payment of income tax or unemployment and disability insurances
2. Taxes Paid By The Employer In Lieu of Employee’s Wages: This category of payroll tax is the tax paid by the employee from his own funds. This tax is directly related to employing a worker and can comprise of certain fixed charges or be proportionally linked to a worker’s salary. These charges paid by the employer generally cover the employer’s contribution towards social security, insurance programs etc

Objectives of Payroll Tax

The Payroll Tax incentive scheme was introduced to meet the following objectives:

1. To help in growth and enhancement of the business sector.
2. To facilitate the provision of rebate, which is paid by the employer for his or her employees.
3. To help prepare businesses during their formative years of functioning.
4. The aid businesses looking to shift base from one location to another.
5. To help businesses that are looking to expand their payroll and who are looking to undertake the liability of the payment of payroll taxes.

However, the payroll tax incentive scheme does not apply to an employer or a group of employers who have been liable for the payroll taxes of the previous year.