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.
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Under rescinded Section 236P of the Income Tax Ordinance 2001, (i) Every banking company shall collect advance tax from a person whose name is not appearing in the Active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