Karachi, November 25, 2024 – The Federal Board of Revenue (FBR) has mandated banks to deduct 0.6% advance tax on cash withdrawals exceeding PKR 50,000 in a single day from individuals not listed on the Active Taxpayers List (ATL).
This directive has been issued under Section 231AB of the Income Tax Ordinance, 2001, aiming to enhance tax compliance and documentation in the economy.
The FBR clarified that banks are obligated to collect this tax from non-ATL individuals at the time of withdrawal. The regulation, which applies to aggregate daily cash withdrawals exceeding PKR 50,000, serves as a deterrent for non-compliance with tax laws. According to the FBR, this measure is expected to not only improve tax collection but also encourage individuals to register as taxpayers and regularly file returns.
The FBR explained the provision under Section 231AB:
“Every banking company shall deduct advance adjustable tax at the rate of 0.6% of the cash withdrawal from a person whose name is not appearing in the active taxpayers’ list on the sum total of the payments for cash withdrawal in a day, exceeding fifty thousand rupees.”
This policy targets non-ATL persons, who are often perceived as evading their fair share of taxes. The FBR has reiterated its commitment to ensuring a level playing field for all taxpayers by strictly implementing this rule.
Banking institutions have been instructed by the FBR to ensure full compliance with the directives. Additionally, the FBR emphasized that the deduction is adjustable, meaning the amount collected as tax can be credited against the taxpayer’s liability during the filing of their annual tax returns.
The FBR has also urged individuals to verify their ATL status and avoid unnecessary deductions by filing their tax returns promptly. The ATL status can be confirmed through the FBR’s online portal or mobile app.
This measure by the FBR is part of broader efforts to widen the tax net and curb the informal cash economy. It is expected that these initiatives will contribute to improved revenue generation and economic stability. The FBR has requested all stakeholders to cooperate in achieving these objectives.
The FBR’s persistent focus on increasing compliance aligns with the government’s agenda of fiscal discipline and transparency. It remains to be seen how effectively the banking sector and the FBR implement these directives to meet the desired outcomes.
