Karachi, July 14, 2023 – In compliance with the recently implemented amendment in the Income Tax Ordinance, 2001, through the Finance Act, 2023, banks have commenced deducting withholding tax on cash withdrawals exceeding Rs50,000 in a single day.
Banking sources have confirmed that the deduction comes into effect as of July 1, 2023. However, this advance tax deduction is applicable only to individuals who are not listed in the active taxpayers’ list (ATL) for the tax year 2022.
READ MORE: Pakistan Exempts Imports By Dignitaries of UAE, Qatar, Bahrain and Saudi Arabia
Under the new amendment, a new section, 231AB, has been added to the Income Tax Ordinance, 2001. According to this provision, every banking company is required to deduct an advance adjustable tax at a rate of 0.6 percent on the total sum of cash withdrawals exceeding fifty thousand rupees per day from individuals not appearing on the active taxpayers’ list.
To clarify, the fifty thousand rupees mentioned represents the cumulative cash withdrawals made in a single day.
READ MORE: FBR Extends Tax Exemption of Rs12.24 Billion on Civil and Military Pensions
It is noteworthy that the provision for cash withdrawal was initially removed through the Finance Act, 2021. However, it has been reintroduced as a means to encourage individuals to disclose their income and assets by filing annual tax returns.
The banks will be deducting the withholding tax on cash withdrawals on behalf of the Federal Board of Revenue (FBR). In the fiscal year 2020-21, the FBR collected an amount of Rs15.14 billion through this tax, which was consistent with the previous fiscal year’s collection.
READ MORE: Hyderabad Customs to Hold Auction of Foreign Origin Motor Vehicles on July 14
The introduction of this withholding tax aims to promote greater tax compliance among individuals and discourage the circulation of undeclared income.
