ISLAMABAD: Banks shall not collect/deduct withholding tax on cash withdrawal from July 01, 2021 subject to approval of the Finance Bill by the National Assembly.
The Finance Bill 2021 proposed abolishing levy of withholding tax on cash withdrawals from banking system.
The withholding tax on cash withdrawal was imposed through Finance Act, 2005 in order to bring persons having taxable income but out of tax net.
Initially the withholding tax was imposed at withdrawal of Rs25,000 on all persons making such transaction at 0.5 percent. However, through Finance Act, 2012 this threshold was increased to Rs50,000.
Later, the withholding tax rate was reduced for income tax return filer to 0.3 percent and for non-filer it was increased to 0.6 percent.
Through Finance Supplementary (Second Amendment) Act, 2019 the withholding tax on return filer at the rate of 0.3 percent was abolished and non-filers were required to pay 0.6 percent on making cash withdrawal above Rs50,000 per day.
Now through Finance Bill 2021 proposed to abolish the 0.6 percent withholding tax on persons not on the Active Taxpayers List (ATL) or non-filers.
The changes proposed through Finance Bill 2021 will be applicable from July 01, 2021 subject to the approval from the National Assembly.