Final tax

Final Tax Final Tax refers to a tax that represents the ultimate and complete liability on a specific income or transaction, meaning no additional tax is payable on that income afterward. Once final tax has been deducted or paid, the taxpayer is not required to include that income again in their total taxable income. This system simplifies compliance by ensuring that the tax deducted at source or paid on the transaction is considered full and final settlement of tax on that income. It often applies to withholding taxes on specific categories such as dividends, interest, royalties, or capital gains. Final tax may also take into account any allowable deductions, exemptions, or tax credits before determining the total amount payable, ensuring fairness in computation.

Example: If a bank deducts 10% tax at source on interest paid to an individual and that deduction is treated as final tax, the taxpayer does not need to declare that interest income again in their annual return — it has already been fully taxed.