WHT collection: Decline from cash withdrawals from banks witnessed

Islamabad: The Federal Board of Revenue (FBR) has witnessed a negative 0.2 percent growth in withholding tax collection from cash withdrawals from banks during 2020-21.

According to the FBR’s year book (2020-21), the decline in WHT collection cash withdrawals from banks is the direct consequence of higher number of income tax return filers, which was reduced collection of WHT from non-filers under this head. However, there was no change in WHT tax rates during 2020-21. The growth of 12.8 percent in withholding tax collection from electricity, under Section 235 of the Income Tax Ordinance, does not commensurate with increase in electricity tariffs.

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The FBR field formations need to enhance monitoring efforts to realize actual potential of WHT from this source, the FBR said. The FBR’s analysis revealed that the growth of 9.9 percent in WHT collection from exports u/s 154. The 25.3 $ billion exports last year also caused spike in collection and there was no change in WHT tax rates during 2020-21 on exports. The WHT remained the major contributor with 72 percent share in the total collection of income tax. The WHT collection during FY 2020-21 stood at Rs1,237.1 billion against Rs1,091.7 billion in the PFY, indicating a growth of 13.3 percent. Ten major components of withholding taxes, contributing around 85 percent to the total WHT collection are: contracts, imports, salary, telephone, dividends, bank interest, cash withdrawal, technical fee, electricity, and exports.