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Friday March 29, 2024

WHT for non-filers not to apply on PRISM transactions

KARACHI: The revenue board said on Monday that the withholding tax imposed on non-cash transaction for non-filers will not be applicable on Pakistan Real-time Interbank Settlement Mechanism (PRISM) transactions. The government introduced Section 236P to Income Tax Ordinance, 2001 in the budget 2015 that applied withholding tax at 0.6 percent,

By our correspondents
July 28, 2015
KARACHI: The revenue board said on Monday that the withholding tax imposed on non-cash transaction for non-filers will not be applicable on Pakistan Real-time Interbank Settlement Mechanism (PRISM) transactions.
The government introduced Section 236P to Income Tax Ordinance, 2001 in the budget 2015 that applied withholding tax at 0.6 percent, which was later reduced to 0.3 percent until September 30, 2015, on non-cash transactions made by non-filers of income tax returns.
The Federal Board of Revenue (FBR) said this provision, which comes into force on July 01, 2015, will not be applicable to PRISM transactions or transfers for tax payments.
“However, if an amount is transferred from an account of a customer of Bank A to an account of a customer of Bank B through PRISM, section 236P will only be inapplicable for the customer of Bank A, if the said customer of Bank A is maintaining a settlement account in PRISM i.e. a PRISM Participant’s account,” the FBR explained.
The FBR further said transfer of Zakat from a bank account will also not attract provisions of this section. Similarly, no tax will be deducted where the value of sale of instruments or amount being transferred is Rs 50,000 or less in a single day, the FBR said.
The purpose of imposing the tax on banking instruments and channels is to curtail the acquisition of assets and expenditures using untaxed money. “Unreported business transactions are also conducted through these means,” it said.
The Section 236P has been introduced in the Income Tax Ordinance, 2001 through Finance Act, 2015, requiring every banking company to deduct tax at 0.6 percent from non-filers, at the time of sale of any instrument, whether against cash or otherwise, including demand draft, pay order, special deposit receipt, cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveller’s cheque or any other instrument of such nature; and at the time of transfer of any sum through cheque or clearing, interbank or intra bank transfers through cheques, online transfer, telegraphic transfer, mail transfer, direct debit, payments through internet, payments through mobile phones, account to account funds transfer, third party account to account fund transfers, real time account to account funds transfer, real time third party account to account fund transfer, automated teller machine (ATM) transfers, or any other mode of electronic or paper based funds transfer.
The FBR said through Income Tax Laws (Amendment) Ordinance, 2015, the rate has been reduced from 0.6 percent to 0.3 percent from July 11, 2015. “This reduced rate will remain effective until September 30, 2015 and rate of deduction of tax under this section will remain 0.6 percent from July 01 to July 10,” FBR clarified.
Further, an amendment in section 231A has also been made whereby rate for non-filers has been increased from 0.5 percent to 0.6 percent. Similarly, for the following section rates have been revised as well and for filers the rate is 0.3 percent and for non-filers it is 0.6 percent.
The FBR said that distinction in withholding tax rate for filers and non-filers was created to increase the cost of doing business for non-filers higher than filers.