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.