Islamabad, June 28, 2023: The National Assembly of Pakistan has given its approval to implement a withholding tax on cash withdrawals made by non-filers of income tax returns, effective from July 1, 2023.
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No withholding tax on cash withdrawal from July 01
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.
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Tax collection from cash withdrawals falls by 52 percent in Tax Year 2020
ISLAMABAD: The income tax collection on cash withdrawal from banking system fell by around 52 percent during tax year 2020 following return filers allowed tax free transactions.
According to statistics released by the Federal Board of Revenue (FBR) the collection of income tax under Section 231A of Income Tax Ordinance, 2001 was at Rs15.17 billion as compared with Rs31.75 billion in the preceding tax year.
Prior to March 2019 the person filing income tax return and were on the Active Taxpayers List (ATL) were liable to pay 0.3 percent on cash withdrawal above Rs50,000 in a day from banking system. Meanwhile, the persons not on the ATL were required to pay 0.6 percent on the cash withdrawal above Rs50,000 in a day.
However, through Finance Supplementary (Second Amendment) Act, 2019 amendment was made to Section 231A Income Tax Ordinance, 2001 and persons on the ATL were exempt from paying 0.3 percent income tax on making cash withdrawal above Rs50,000.
The levy of withholding income tax on cash withdrawal was introduced through Finance Act, 2005. Initially the tax was payable on withdrawal of above Rs25,000 per day. But through Finance Act, 2012 the limit was increased to Rs50,000.
According to Section 231A of the Income Tax Ordinance, 2001 every banking company shall deduct tax, if the payment for cash withdrawal, or the sum total of the payment for cash withdrawal in a day, exceeds fifty thousand rupees.
The FBR clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.
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Tax Year 2021: rate of tax on cash withdrawal from banks
ISLAMABAD: Federal Board of Revenue (FBR) has updated rate of income tax to be deducted at the time of cash withdrawal from banks during tax year 2021 (July 01, 2020 to June 30, 2021).
The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendments brought through Finance Act, 2020.
The FBR updated the rate of tax to be deducted under section 231A of Income Tax Ordinance shall be 0.6 percent of the cash amount withdrawn, for the person whose name is not appearing in the active taxpayers’ list.
The text of Section 231A is as follow:
231A. Cash withdrawal from a bank.—(1) Every banking company shall deduct tax at the rate specified in Division VI of Part IV of the First Schedule, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds fifty thousand rupees.
“Explanation.- For removal of doubt, it is clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.”
The FBR also updated the rate of tax to be deducted under section 231AA shall be at the rate of 0.6 percent of the transactions for the person whose name is not appearing in the active taxpayers’ list.
Following is the text of Section 231AA of the Ordinance is:
231AA. Advance tax on transactions in bank.— (1) Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect advance tax at the time of sale against cash of any instrument, including Demand Draft, Pay Order, CDR, STDR, SDR, RTC, or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.
(2) Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect advance tax at the time of transfer of any sum against cash through online transfer, telegraphic transfer, mail transfer or any other mode of electronic transfer.
(3) The advance tax under this section shall be collected at the rate specified in Division VIA of Part IV of the First Schedule, where the sum total of payments for transactions mentioned in sub-section (1) or sub-section (2) as the case may be, exceed twenty-five thousand rupees in a day.
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Cash withdrawal should be exempted from withholding tax; Senate recommends key changes in Finance Bill 2020
ISLAMABAD: The Senate of Pakistan has recommended the government to abolish withholding tax on cash transactions from banks. In its key tax recommendations for finalizing budget 2020/2021, the Senate recommended that the government should abolish all kinds of withholding tax chargeable on cash transactions from banks.
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Tax collection from cash withdrawal falls by 52 percent
ISLAMABAD: The collection of withholding income tax from cash withdrawal from banks fell by 52 percent during first half of the current fiscal year as the government withdrew the levy on active taxpayers.
The collection of withholding income tax fell to Rs8.6 billion during July – December of current fiscal year 2019/2020 as compared with Rs17.8 billion collected in the corresponding period of the last fiscal year, according to official data.
Through Finance Act, 2019, the imposition of withholding tax on cash withdrawal by active taxpayers was eliminated in order to encourage income tax return filing.
However, the withholding tax rate at the rate of 0.6 percent is still leviable on persons not appearing on the active taxpayers list issued by the Federal Board of Revenue (FBR).
At present every banking company is required under Section 231A of Income Tax Ordinance, 2001 to collect withholding tax at 0.6 percent on payment for cash withdrawal, or sum total of payment for cash withdrawal, in a day, exceeding Rs50,000 for persons not appearing the Active Taxpayers List (ATL).
The same rate of 0.6 percent is applicable under Section 231AA and Section 231AA of the Ordinance on sale against cash of any instrument including demand draft, payment order, CDR, STDR, RTC, any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments where sum total of transactions exceeds Rs, 25,000 in a day, for persons not appearing in the Active Taxpayers’ List and transfer of any sum against cash through online transfer, telegraphic transfer mail transfer or any other mode of electronic transfer, where sum total of transactions exceed Rs. 25,000/-in a day, for persons not appearing in the Active Payers’ List.
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No tax on cash withdrawal from banks on active taxpayers: FBR
ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday said that there is no tax on cash withdrawal from banks for those whose names are on the Active Taxpayers List (ATL).
Otherwise, the withholding tax rate on cash withdrawal is 0.6 percent for persons not appearing on the ATL.
In order to ensure names on ATL, taxpayers are required to file their annual income tax returns. The FBR urged the taxpayers to avail the extended the last date for filing income tax returns for tax year 2019, which is December 31, 2019.
The FBR said that in case of enlistment in the ATL, the taxpayers shall have following benefits:
— Almost half of the withholding tax as compared with the inactive taxpayers
— 5.5 percent tax on imports (raw material)
— 6 percent tax on imports (commercial)
— 15 percent tax on dividends
— 10 percent tax on bank and savings scheme profit worth up to Rs0.5 million and 15 percent on above Rs0.5 million
— 4.5 percent tax on sale of goods by persons except companies
— 10 percent tax on provision of services by persons except companies
— 7.5 percent tax on contract executed by person except companies
— 15 percent tax on prize bonds money of prize bonds
— 12 percent tax on commission
— Annual token fee of vehicles from Rs800 to Rs10,000
— Withholding tax on vehicle registration from Rs7,500 to Rs250,000
— No tax on cash withdrawal of more than Rs50,000 from banks
— No tax on bank transactions (cross cheque, pay order, demand draft etc.)
— One percent tax on purchase of property
— 10 percent tax on sale by auction
— Tax on mobile phone import from Rs70 to Rs200
— 10 percent tax deduction for payment against advertisement to non-resident person
The FBR said that in case of no enlistment in the ATL, the following tax rates are applicable:
— Almost double tax rates
— 11 percent tax on imports (raw material)
— 12 percent tax on imports (commercial)
— 30 percent tax on dividends
— 20 percent tax on bank and savings scheme profit worth up to Rs0.5 million and 30 percent on above Rs0.5 million
— 9 percent tax on sale of goods by persons except companies
— 20 percent tax on provision of services by person except companies
— 15 percent tax on contract executed by person except companies
— 30 percent tax on prize money of prize bonds
— 24 percent tax on commission
— Annual token fee of vehicles from Rs1,600 to Rs20,000
— Withholding tax on vehicle registration from Rs15,000 to Rs500,000
— 0.6 percent tax on cash withdrawal of more than Rs50,000 from banks
— 0.6 percent tax on bank transactions (cross cheque, pay order, demand draft etc.)
— 2 percent tax on purchase of property
— 20 percent tax on sale by auction
— Tax on mobile phone import from Rs140 to Rs400
— 20 percent tax deduction for payment against advertisement to non-resident person
The FBR said that those persons failed to file their return then the tax authorities would assess the applicable tax without serving any notice. Further, legal action will be taken resulting into imprisonment of one to three years.
The FBR also said that late income tax return filers will pay fine.
The FBR said that the filing of income tax returns is mandatory for all persons with annual income of Rs400,000 or more.
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Persons on ATL exempted from tax on cash withdrawal
ISLAMABAD: There is no withholding tax on cash withdrawal from banking system by a person, whose name is appeared on Active Taxpayers List (ATL), officials in Federal Board of Revenue (FBR) said on Friday.
Under Section 231A of Income Tax Ordinance, 2001 the withholding tax rate is 0.6 percent for a person making cash withdrawal above Rs50,000 from banking system.
However, this tax rate is only applicable on a person whose name is not appeared on ATL.
For appearing on the ATL a person is required to file his annual income tax returns by due date prescribed by the FBR. In other cases the person can file his return after due date after payment of penalty to ensure his name on the ATL.
The officials said that through Finance Supplementary (Second Amendment) Act, 2019 the government abolished 0.3 percent withholding tax rate on persons who were compliant in return filing.
The Section 231A related to cash withdrawal from a bank said that every banking company shall deduct tax at the rate specified in Division VI of Part IV of the First Schedule, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds fifty thousand rupees.
Explanation: For removal of doubt, it is clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.
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Cash withdrawal tax card: updated for Tax Year 2019
KARACHI: Federal Board of Revenue (FBR) has issued updated up to March 09, 2019 for withholding tax rate on cash withdrawal from banking system.
The rate card has been updated after amendment to Income Tax Ordinance, 2001 introduced through Finance Supplementary (Second Amendment) Act, 2019.
The financial institutions are required to collect/deduct withholding tax under Section 231 of Income Tax Ordinance, 2001. In the latest amendment the government abolished withholding tax on cash withdrawal for filers of income tax returns.
Following are the rates for cash withdrawal and cash based transactions:
– A bank shall collect 0.6 percent under Section 231A from non-filers on payment for cash withdrawal, or sum total of payment for cash withdrawal, in a day, exceeding Rs50,000.
– Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect 0.6 percent from non-filers under Section 231AA (I) at the time of sale against cash of any instrument, including demand draft, payment order, CDR, STDR, RTC, any other instrument of bearer nature or on receipt of cash on cancellation of any of these instrument where sum of total of transactions exceeds Rs25,000 in a day.
– Every banking company, non-banking financial institution, exchange company or any authorized dealer of foreign exchange shall collect 0.6 percent from non-filers under Section 231AA (2) at the time of transfer of any sum against cash through online transfer, telegraphic transfer mail transfer, telegraphic transfer, mail transfer or any other mode of electronic transfer. Where sum total of transactions exceed Rs25,000 in a day.
The withholding tax deduction is adjustable against income tax liability in case a non-filer declares his annual income and submits wealth statement.
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FBR amends requirement of cash withdrawal information by banks
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued new instructions to banks regarding providing details of cash withdrawal by filers and non-filers.
The FBR issued SRO 469(I)/2019 dated April 17, 2019 to amend SRO 1165(I)/2018 dated September 28, 2018. The amendment has been made regarding amount deducted on cash withdrawal from banks by filers and non-filers during a month.
Through SRO 1165(I)/2018, the FBR changed the reporting criteria for banks under Income Tax Rules, 2001. Under the revised reporting criteria banks have been required to provide information of persons who have withdrawn cash exceeding Rs50,000 in a day and tax deductions thereon for filers and non-filers, aggregating to Rs 1 million or more during a month.
The banks are required to provide information of cash withdrawal including name of person, CNIC, address, amount withdrawn during a month.
However, through the latest SRO the FBR added a column of amount of tax deducted to the table of information.