Karachi, November 23, 2023 – The Federal Board of Revenue (FBR) has collected approximately Rs 4 billion as withholding tax on cash withdrawals from banks, according to provisional data obtained from the Large Taxpayers Office (LTO) in Karachi.
This significant collection was achieved within the first four months of the fiscal year 2023-24, spanning from July to October.
The noteworthy surge in revenue comes following the reintroduction of the withholding income tax on cash withdrawals, as stipulated under Section 231AB of the Income Tax Ordinance, 2001. The tax office, operating under the updated regulatory framework, is now empowered to deduct an advance adjustable tax at a rate of 0.6% from any individual conducting cash withdrawals exceeding Rs. 50,000 in a single day.
This initiative is part of the newly introduced Section 231AB, which mandates every banking institution to apply this withholding tax on individuals whose names do not appear in the Active Taxpayer List at the time of making a significant cash withdrawal. The scope of this provision extends beyond traditional over-the-counter withdrawals to include cash withdrawals made through credit cards or ATMs.
Moreover, the tax withheld under this provision is adjustable against the individual’s tax liability for the applicable tax year, providing a structured mechanism for individuals to account for the deducted tax within their overall tax obligations.
Provisional data reveals that the tax office achieved a collection milestone of around Rs 1 billion in withholding tax during the month of October 2023 alone. This robust collection underscores the effectiveness of the introduced measures and the willingness of taxpayers to comply with the updated regulations.
The success of this initiative aligns with the government’s broader objectives of enhancing tax revenue, curbing the informal economy, and promoting financial transparency. By focusing on cash withdrawals, a common aspect of everyday financial transactions, the FBR aims to ensure a more comprehensive tax net and discourage the hoarding of large sums of cash outside the formal financial system.
While the collection figures are impressive, it also raises questions about the overall impact on individuals and businesses, especially those who frequently engage in substantial cash transactions. The FBR’s data for the first four months of the fiscal year indicates a growing compliance with the newly introduced tax regulation, but it remains to be seen how the broader taxpayer community adapts to these changes in the long term.
The FBR’s achievement of collecting Rs 4 billion in withholding tax on cash withdrawals from banks reflects a positive response to the reintroduction of these measures. The robust collection, especially during the month of October, highlights the successful implementation of the updated tax framework and sets the stage for continued efforts to strengthen tax compliance and transparency in financial transactions.
