Islamabad, June 28, 2023: The National Assembly of Pakistan has given its approval to implement a withholding tax on cash withdrawals made by non-filers of income tax returns, effective from July 1, 2023.
This measure was reintroduced through the Finance Bill 2023 and aims to encourage individuals to become tax filers and contribute to the country’s tax base.
Under the new provision, an adjustable advance tax will be levied at a rate of 0.6 percent on cash withdrawals exceeding Rs 50,000 in a single day by non-filers. This tax will be collected by banks at the time of the withdrawal transaction. It is important to note that this tax only applies to individuals who have not filed their income tax returns.
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Tax experts at PwC A. F. Ferguson Chartered Accountants have highlighted that the purpose of this tax is to discourage cash transactions and encourage individuals to become compliant taxpayers. By implementing this tax, the government aims to bring non-filers into the tax net and promote transparency in financial transactions.
To prevent duplicate implications, amendments have been made in the Tenth Schedule to ensure that the withholding tax on cash withdrawals applies exclusively to non-filers. This adjustment will help streamline the taxation process and avoid any unintended consequences for individuals who are already fulfilling their tax obligations.
The reintroduction of the adjustable advance tax on cash withdrawals for non-filers demonstrates the government’s commitment to broadening the tax base and promoting tax compliance. It is part of the ongoing efforts to strengthen the country’s revenue collection system and create a more equitable tax environment.
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Individuals who have not yet filed their income tax returns are advised to consider the implications of this new tax and explore the benefits of becoming tax filers. By fulfilling their tax obligations, individuals not only contribute to the development of the country but also avoid additional taxes and penalties associated with non-compliance.
The implementation of this withholding tax on cash withdrawals from non-filers will commence on July 1, 2023. Banks and financial institutions are expected to ensure the proper collection and reporting of this tax to the relevant tax authorities.
The government, in collaboration with tax experts and regulatory bodies, will continue to monitor the impact of this measure and make any necessary adjustments to achieve its intended objectives.
