FBR launches audit of WHT collected by banks

KARACHI: The Federal Board of Revenue (FBR) has launched an audit of general ledger accounts to verify the amount of withholding tax collected and deposited by banks, official sources said on Tuesday.

The FBR suspected that the banks are not depositing the due amount collected under different heads of withholding taxes, especially after the introduction of different withholding tax rates applicable for filers and non-filers, they added.

An official at the Large Taxpayers Unit (LTU) Karachi said banks head offices maintained the record of withholding tax deducted by their branches. The FBR while directing the banks to provide branch-wise details of withholding tax deduction has also sought help from the State Bank of Pakistan (SBP) to issue specific instructions to banks in this regard, the official added.

Under Section 165A of the Income Tax Ordinance, 2001, the FBR has been authorised to retrieve data of transactions from banks, but this provision has been granted stay by the higher courts on the grounds of secrecy of accountholders.

The banks are required to provide information included online access to its central database containing details of its accountholders and all transactions made in their accounts; a list containing particulars of deposits aggregating Rs1 million or more made during the preceding calendar month; a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to Rs100,000 or more during the preceding calendar month; a consolidated list of loans written off exceeding Rs1 million during a calendar year; and a copy of each currency transactions report and suspicious transactions report generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010.

The official said the abovementioned information are vital to increase the number of taxpayers, but since it is in litigation; therefore, the revenue board is seeking reconciliation of the tax amount collected and deposited by the banks.

The government introduced Section 236P to the Income Tax Ordinance, 2001 through the Finance Act, 2015. This provision is only applicable on non-filers of income tax returns and withholding tax rate at the rate of 0.6 percent is imposed at the time of non-cash transaction of above Rs50,000 in a day.

The official said for the last two years, the banks are not sharing the details of persons making transactions under Section 236P and due to court restrictions the Federal Board of Revenue had no other option, but to contend with whatever banks are depositing the amount under this head. The amount of withholding tax collected by banks registered with the LTU Karachi declined to Rs12.5 billion in 2016/17 as compared to Rs12.9 billion during the preceding fiscal year.