KARACHI: The Federal Board of Revenue (FBR) collected roughly Rs10 billion in withholding tax from non-cash banking transactions in fiscal year 2020/21, owing to increased economic activity following a decrease in coronavirus infections.
Official sources said on Friday that the collection in the current fiscal year is 33% higher than the previous fiscal year’s Rs7.5 billion.
According to the sources, the administration chose not to enforce strict lockdown throughout fiscal year 2020/21, as it did when the epidemic first hit the country in February 2020.
These figures are based on tax deducted by banks that fall under the jurisdiction of the Large Taxpayers Office (LTO) Karachi, which has jurisdiction over the majority of the country’s banks.
Under Section 236P of the Income Tax Ordinance, 2001, the revenue board collects 0.6 percent withholding tax on non-cash banking transactions. However, this clause was repealed by the Finance Act of 2021, which means that banks have been prohibited from collecting or deducting withholding tax under this heading since July 1, 2021.
The Finance Act of 2015 included Section 236P to encourage the submission of income tax returns in the country. Under this heading, banks were to collect withholding tax on behalf of the FBR on all transactions over Rs50,000 that were not cash.
The Federal Board of Revenue was met with strong opposition when this clause was first introduced, particularly from retailers who agitated against it. As a result, the government cut the withholding tax rate for both filers and non-filers of income tax returns to 0.3 percent.
The government changed the words “filer” and “non-filer” in the context of Active Taxpayers with the enactment of the Finance Act of 2019. As a result, those on the Active Taxpayers List (ATL) paid a lower rate of 0.3 percent, compared to 0.6 percent for those who were not on the ATL.
When this section was first implemented, there were 1.8 million income tax returns filed; however, due to the passage of time and tight enforcement of withholding tax regulations, the number of returns filed has risen to almost 3 million by the tax year 2020.
Because of the large number of income tax returns, the government decided to eliminate the provision in order to make things easier for the general people.
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