Karachi, August 7, 2024 – The Federal Board of Revenue (FBR) successfully garnered approximately Rs 12 billion through the imposition of withholding tax on cash withdrawals from banks in the fiscal year 2023-24.
This substantial collection highlights the effectiveness of the FBR’s measures in ensuring compliance and expanding the tax base.
Sources within the FBR revealed that this significant sum was collected from banks registered with the Large Taxpayers Office (LTO) in Karachi. The withholding tax on cash withdrawals has proven to be a crucial revenue stream for the FBR, serving as a robust mechanism to encourage individuals with taxable income to file their annual tax returns.
Initially, the withholding tax provision on cash withdrawals was rescinded through the Finance Act, 2021. However, recognizing its pivotal role in revenue generation and tax compliance, legislators reinstated the provision. The reintroduction was executed through the Finance Act, 2023, by incorporating Section 231AB into the Income Tax Ordinance, 2001.
According to Section 231AB, every banking company is mandated to deduct an advance adjustable tax at a rate of 0.6% on cash withdrawals from individuals whose names do not appear on the active taxpayers’ list. This tax is applicable when the cumulative amount of cash withdrawals in a single day exceeds fifty thousand rupees. The section explicitly clarifies that the threshold of fifty thousand rupees encompasses all cash withdrawals made in a single day.
The FBR’s renewed focus on withholding tax aims to broaden the tax net and ensure equitable tax compliance. By targeting non-filers and leveraging the banking system, the FBR has taken a strategic step towards enhancing revenue collection and fostering a culture of tax responsibility.
The reintroduction of this tax provision is a testament to the FBR’s commitment to fortifying Pakistan’s fiscal framework. The substantial revenue collected underscores the importance of maintaining stringent tax measures and continuous adaptation of the tax code to meet evolving economic realities.
