Islamabad, May 24, 2024 – The Federal Board of Revenue (FBR) has successfully collected Rs 10 billion in advance tax from cash withdrawals at banks during the first 10 months of the current fiscal year.
This significant amount was collected exclusively from banks headquartered in Karachi, according to sources at the FBR.
Officials disclosed to PKRevenue.com that the total national collection from this tax could be considerably higher, given that numerous major banks are registered with tax offices in Islamabad and Lahore. The provision for collecting tax on cash withdrawals from individuals not on the Active Taxpayers List (ATL) was reintroduced through the Finance Act, 2023.
The new Section 231AB of the Income Tax Ordinance, 2001, mandates that every banking company deducts an advance adjustable tax at a rate of 0.6% from individuals not listed on the ATL. This tax applies to the total cash withdrawals exceeding Rs 50,000 in a single day, including withdrawals made through credit cards or ATMs.
This withholding tax on cash withdrawals is adjustable against the tax liability of the individual for the tax year. However, certain exemptions apply, and the tax shall not be deducted in the following cases:
• Withdrawals made by the Federal Government or a Provincial government.
• Withdrawals by a foreign diplomat or a diplomatic mission in Pakistan.
• Withdrawals by an individual who presents a certificate from the Commissioner stating that their income for the tax year is exempt.
The reintroduction of this provision aims to enhance tax compliance and broaden the tax base by targeting non-filers who make significant cash withdrawals. This measure also encourages individuals to ensure their names are included in the ATL to avoid the additional tax burden.
The FBR’s efforts to implement and enforce this tax collection mechanism demonstrate its ongoing commitment to increasing revenue and strengthening the country’s tax infrastructure. As the fiscal year progresses, it is anticipated that the overall collection from this measure will contribute significantly to the national exchequer.
Stakeholders and taxpayers are encouraged to stay informed about these regulations to ensure compliance and avoid potential penalties. The FBR continues to work towards creating a more efficient and equitable tax system in Pakistan.
