Over Rs50,000 cash withdrawals thru credit cards/ATMs: Non-filers to pay 0.6pc WHT: FBR
- Through Income Tax Circular 2 of 2023, FBR has explained important amendments made in the Income Tax Ordinance, 2001 (the Ordinance) through Finance Act 2023
ISLAMABAD: Over Rs 50,000 cash withdrawals by non-filers, in a single day, through credit cards/ATMs would also be subjected to 0.6 percent withholding tax.
Through the Income Tax Circular 2 of 2023, the Federal Board of Revenue (FBR) has explained important amendments made in the Income Tax Ordinance, 2001 (the Ordinance) through Finance Act 2023.
The Finance Act 2023 has reintroduced tax collection on cash withdrawals from Non-ATL persons by banks. A new section 231AB has been introduced, requiring every banking company to deduct advance adjustable tax @ 0.6 percent from a person whose name is not appearing in the Active Taxpayer List, at the time of making payment for sum total of cash withdrawal (aggregate cash withdrawal) in a single day exceeding Rs.50,000. Cash withdrawals made on credit cards or from ATMs shall also be covered by this provision, the FBR clarified.
Cash withdrawal: Non-filers to pay 0.6pc advance tax
The FBR further said that if the aggregate of cash amount withdrawn in a single day exceeds Rs.50,000, the tax is required to be deducted on the entire amount of cash withdrawn.
The withholding tax on cash withdrawal is an adjustable tax against tax liability of the person for a tax year. The tax shall not be deducted in case of withdrawals made by the federal government or a provincial government; a foreign diplomat or a diplomatic mission in Pakistan; or a person who produces a certificate from the commissioner that his income during the tax year is exempt, the FBR added.
The FBR said that section 236Y was introduced through Finance Act 2022, whereby payment tonon-residents through a debit/credit card had been subjected to 1% withholding tax rate for ATL persons and 2 percent for Non-ATL persons.
These payments to non-resident persons have a substantial impact on foreign exchange outflow from the country.
In order to discourage unnecessary outflow of foreign exchange reserves, withholding tax rates under section 236Y have been increased from one percent to 5 percent for ATL persons and from 2 percent to 10 percent for non-ATL persons through Finance Act, 2023, the FBR added.
Copyright Business Recorder, 2023
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