KARACHI: The collection of withholding tax from non-cash banking transactions has declined nine percent to Rs4.26 billion during the first five months of the current fiscal year, owing to rising numbers of active taxpayers, official sources said on Friday.
According to statistics of Large Taxpayers Unit (LTU) Karachi, the collection of withholding tax from non-filers on banking transactions was at Rs4.26 billion during July-November 2017 as compared with Rs4.69 billion in the corresponding months of the last year.
LTU Karachi sources said the documentation drive launched by the Federal Board of Revenue (FBR) increased the number of return filers.
The government imposed withholding tax on non-filers making non-cash banking transactions through Section 236P of Income Tax Ordinance during fiscal year 2015/2016.
The tax rate under this head was introduced at 0.6 percent, but on the protest of small traders the rate was reduced to 0.3 percent which remained applicable till March 2016. However, the reduced rate was enhanced to 0.4 percent, which would be applicable till December 31, 2017.
The purpose of the imposition of the withholding tax was to increase cost of transactions for non-compliant taxpayers. This strategy helped the FBR receive higher number of return filers.
The FBR sources said only those taxpayers are exempted from implementation of withholding tax on non-cash banking transactions, whose names are on the active taxpayer list (ATL).
As per the latest ATL-2016, the FBR received 1.36 million returns for tax year 2016 by December 17, 2017 as compared with 1.15 million active taxpayers on the corresponding date of last year.
The exemption will be available for ATL-2016 till March 2018, when the FBR will issue new list for returns filed for tax year 2017.
The collection of withholding tax under this head also declined by five percent to Rs875 million in November 2017 as compared with Rs925 million in the corresponding months of the last year.
The LTU sources also attributed the cash-based transactions and heavy investments in prize bonds for the decline in collection of withholding tax.