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ISLAMABAD: The government is considering to impose withholding tax on banking transactions of non-filers of income tax returns including cash withdrawals from banks through the Presidential Ordinance to generate around Rs 45 billion.

Sources told Business Recorder that the Federal Board of Revenue (FBR) has drafted a proposal as a major revenue generation measure, but the same has not been approved yet.

The measure has not been proposed for the filers of income tax returns appearing on the “Active Taxpayers List.”

The revenue impact of the proposal is nearly Rs 45 billion. The proposal under consideration is to impose withholding tax on cash withdrawal from banks, banking instruments and withholding tax on banking transactions other than through cash.

New tax raising steps under consideration

Sources confirmed that, “Yes three proposals have been drafted including restoration of section (231A); Collection of tax on cash withdrawal; Section (231AA) Collection of tax on banking instruments and section (236P) collection of tax on banking transactions other than through cash. So far, the proposals have not been approved. If the proposals are cleared, it would be made part of the Presidential Ordinance to be promulgated,” they added.

The FBR has repeatedly claimed that many withholding tax provisions were eliminated and consequently, the percentage contribution of withholding taxes in direct taxes has also been reduced. But the proposed measure is against the tax policy of reducing reliance on the withholding taxes.

The abolished Section 231A of the Income Tax Ordinance 2001 stated: “Every banking company shall deduct tax at, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds Rs 50,000.”

The abolished Section 231AA of the Income Tax Ordinance 2001 says as: “Every banking company, non-banking financial institution, exchange company or any authorised dealer of foreign exchange shall collect advance tax at the time of sale against cash of any instrument, including demand drafts, pay orders, call deposit receipts, special term deposits, special drawing right, real time clearing, or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.”

Under rescinded Section 236P of the Income Tax Ordinance 2001, (i) Every banking company shall collect advance tax from a person whose name is not appearing in the Active Taxpayers List on sale of instruments, including demand draft, pay order, special deposit receipts, cash deposit receipt, short term deposit receipt, call deposit receipt and rupee travelers’ cheque, where payment for sum total of all transactions exceed Rs 50,000 in a day.

(ii) Every banking company shall collect advance tax from a person whose name is not appearing in the active taxpayers list on transfer of any sum through cheque or clearing, interbank or interbank transfers through cheque, online/telegraphic/mail transfer, where payment for sum total of all transactions exceeds Rs 50,000 in a day.

Copyright Business Recorder, 2023


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Dr M Amir Arain Jan 24, 2023 04:29pm
Dear Sir/Ma'am It would be highly appreciated if ask me about WHT rate on each Rs 50000.00. Or more than Rs. 50000.00.
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Khalid Mahmood Jan 24, 2023 10:41pm
@Dr M Amir Arain, If amount exceeds 50,000/- then WHT on entire amount.
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TimeToMovveOn Jan 25, 2023 05:36pm
Pakistani elite are living in luxuary, not paying their fair share of taxes to run the govt, meanwhile other countries are trying to bail out pakistan with loans and grants. Pakistan's problems are no longer worlds problems. Its own citizens have to pay taxes and support the functioning of govt. Why should tax payers of other countries keep bailing out Pakistan,
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Aman Jan 27, 2023 01:21pm
@TimeToMovveOn, everyone keeps talking abt the elite and privileged but let’s get some facts on the table. What’s the percentage of elite rich in Pakistan max5 percent? So all the burden comes down to the middle class with all these taxes and lame policies. So One should start thinking abt the middle class which actually is contributing the most
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