Islamabad – Banks have collectively remitted Rs 25 billion in windfall tax to the Federal Board of Revenue (FBR) following the dismissal of their petition by the Sindh High Court (SHC), official sources disclosed on Friday.
According to insider reports, an agreement was reached between the banks and the FBR, facilitating the immediate payment of Rs 25 billion to the Large Taxpayers Office (LTO) Karachi. The agreement, finalized after extensive deliberations between the FBR chairman, the LTO Chief Commissioner, the State Bank of Pakistan (SBP), and the Pakistan Banks Association, enabled banks to fulfill their tax obligations while retaining the right to challenge the verdict before the Supreme Court of Pakistan.
A day prior, the SHC dismissed multiple petitions filed by banking institutions seeking interim relief against the Windfall Income Tax, reaffirming the legal validity of the contentious levy. The division bench rejected the challenges questioning the constitutionality of Section 99D of the Income Tax Ordinance 2001 and SRO 1588(I)/2023, issued on November 21, 2023, to enforce the tax regulation.
Sources further indicated that the FBR anticipates an additional collection of approximately Rs 17 billion from banks operating under the jurisdiction of tax offices in Lahore and Islamabad, amplifying the tax revenue from the sector.
Section 99D was introduced in the Finance Act, 2023, empowering the FBR to impose supplementary taxation on income, profits, and gains that have arisen due to economic fluctuations yielding windfall earnings. The provision authorized retrospective enforcement for the preceding three tax years, mandating banks to contribute additional levies alongside their standard tax obligations.
To operationalize the legislation, the FBR promulgated SRO 1588(I)/2023, detailing the methodology for calculating windfall tax applicable to banking institutions. The primary objective of this tax measure is to curb speculative gains banks accrue through exchange rate volatility and rupee-dollar fluctuations.
However, rather than complying outright, banks opted to challenge the constitutionality of the provision in court, seeking judicial intervention. With the SHC ruling in favor of the FBR, banks now face the imperative of adhering to the statutory obligations while evaluating their next legal recourse.
This landmark ruling underscores the government’s resolve to regulate windfall profits within the banking sector, ensuring equitable taxation and reinforcing fiscal discipline across financial institutions.