ISLAMABAD: The federal Board of Revenue (FBR) will defend its decision of levying 0.2 percent withholding tax on bank transactions before the National Assembly Standing Committee on Finance and Revenue today (Thursday).
In this regard, FBR has prepared comprehensive briefing for the committee along with set of briefs which have been received by the secretariat of concerned committee.
Last Friday, National Assembly Standing Committee on Finance, after election of new Chairman, decided to get briefing from the Chairman FBR on 0.2% withholding tax, stalled payment of sales tax refund by FBR as well as on implementation status of the subsidy being provided by the government to farmers under Kissan Package announced by the Prime Minister.
A well-placed official source at FBR told this scribe here on Wednesday that FBR was of the stance that withholding tax on cash withdrawal and bank transactions was a form of advance taxation and such a mode of tax collection was also called the presumptive tax regime.
In this regard, Section 231-A of the Income tax ordinance 2001 of Pakistan is reproduced here which imposes tax on cash withdrawal from the bank account.
As per section 231A-cash withdrawal from a bank every bank 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.
The Finance Act 2013 in Pakistan has made certain changes increased the rate of withholding tax on cash withdrawal from 0.2% to 0.3%. In budget 2014-15 withholding tax rate was proposed to be increased by 0.2% to make it 0.5% per transaction for transactions above Rs.50, 000…but it remained same as last year i.e. 0.3%.
WHT is not applicable on IBFT (Inter Bank Funds Transfer) i.e. if a customer transfers any amount from his bank account to another bank another account WHT will not be applied as the money remains in banking system of Pakistan or with the SBP.
Similarly, Chairman of the committee Qaiser Ahmad Sheikh also confirmed to this scribe that members of the committee had serious reservations over WHT because this issue had been stalled national economy due to tussle between the traders’ community and government.
Therefore, will try to look into the reasons behind the imposition of this tax” he observed adding that committee would also take up other agenda items including stalled payment of sales tax refund by FBR as well as on implementation status of the subsidy being provided by the government to farmers under Kissan Package announced by the Prime Minister.
It is pertinent to note here that on October 12, this year, Finance Minister Ishaq Dar after meeting with a delegation of traders’ community announced that WHT on bank transaction is expected to be reduced by 0.2% while tax-free transaction threshold can also be raised by Rs.1, 00,000.
Federal Minister Ishaq Dar ensured traders during negotiations, which was held in Islamabad that their issues will solve soon and more and more steps will be taken in order to provide facilities to the business community. He also requested to all business communities to support government for the sake of improved economic situation and to increased tax net.
