The government is considering to impose a withholding tax on banking transactions through the promulgation of a Presidential Ordinance to generate around Rs 45 million.
Withholding Tax on Banking Transactions to Generate Major Revenue
The sources have confirmed that the Federal Board of Revenue (FBR) has drafted the proposal in order to generate a major revenue, but the proposal is yet to be finalized or approved by the Finance Minister Ishaq Dar. It is pertinent to mention here that the revenue generation measure has not been proposed for the filers of income tax returns appearing on the “Active Taxpayers List.”
As per sources, “Three proposals have been chalked out including restoration of section (231A); Collection of tax on cash withdrawal; section (231AA) Collection of tax on banking instruments and section (236P) collection of tax on banking transactions other than through cash. If the proposals are approved, it would be made part of the Presidential Ordinance to be promulgated.”
Restoration of Section 231A
The abolished Section 231A of the Income Tax Ordinance 2001 stated: “Every banking company shall deduct tax at, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds Rs 50,000.” It further stated, “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 drafts, pay orders, call deposit receipts, special term deposits, special drawing right, real-time clearing, or any other instrument of bearer nature or on receipt of cash on cancellation of any of these instruments.”