ISLAMABAD: Federal Board of Revenue Thursday clarified circular regarding withholding tax on purchase of agricultural produce from growers and commission agents.
Secretary (Income Tax Policy) Rabia Yaser Durrani has said that different representatives of flour mills and trade bodies have raised the issue of income tax deduction on purchase of agricultural produce/wheat from growers/commission agents and have sought clarification on this matter.
She stated that the FBR has already clarified the legal position on this subject though paras 5 and 6 of Circular No 10 of 2011 dated Aug 27, 2011 which read, “(5) The person purchasing agricultural produce through a commission agent shall be required to deduct advance tax at 10 per cent on the amount of commission paid to the agent and tax u/s 153(1)(a) shall not be deductable on such transactions. The grower making sales through such commission agent shall also not be required to furnish the prescribed certificate.
(6) Exemption provided under sub clause (a) of clause (12) of Part-IV of Second Schedule to the Ordinance, is not available to the traders of agricultural produce and withholding tax shall be deductable from them at the prescribed rates.”
The circular explains that no advance income tax u/s 153(1)(a) be deducted in case the purchase of agricultural produce is made directly from the growers or growers making sales through commission agent. However, withholding tax u/s 233 shall apply on the amount of commission paid to the commission agent. Meanwhile, if the purchase of agricultural produce is made from the traders then the withholding tax u/s 153 shall apply.
All the field formations have been directed to follow and implement these directions of the Board.
