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July 23, 2019

LTU Karachi collects Rs11.52bln WHT on non-cash banking transactions

Business

July 23, 2019

KARACHI: The withholding tax collection from non-cash banking transactions registered five percent growth during fiscal year 2018/19 despite record increase in income tax return filing during the period, sources said on Monday.

The collection of withholding tax from non-cash banking transactions by Large Taxpayers Unit (LTU) Karachi increased to Rs11.52 billion during 2018/19 as compared with Rs10.96 billion in the corresponding period of the last fiscal year.

In order to enhance the return filing and documentation of the economy, the government introduced Section 236P to Income Tax Ordinance, 2001 through Finance Act, 2015.

The withholding tax under this section was imposed only on non-compliant taxpayers who fail to file their returns, while making non-cash banking transactions.

The withholding tax rate was introduced at 0.4 percent on such transactions till June 30, 2018. However, the reduced rate was withdrawn from July 1, 2018 and its normal rate 0.6 percent was imposed on transactions above Rs50,000 per day by a non-filer.

Sources in the LTU Karachi said the slowdown in growth of revenue collection under this head was due to record income tax return filing for tax year 2018.

The income tax return filing has increased to 2.2 million as of July 21, 2019 for tax year 2018 and it will increase further as the last date for filing return has been extended up to August 2, 2019.

A FBR official said that most of the people making large transactions - mostly traders - had documented their businesses. However, still a number of traders and other businesses were out of the tax base and opted to operate in a cash-based economy.

The high number of tax compliance under this head helped the banking system to build-up their deposits.

The deposits of the banking system increased to Rs14.46 trillion by June 2019 as compared with Rs13.06 trillion in the same month of last year, showing 10.72 percent growth.

Sources said the revenue under this head would fall in current fiscal year due to measures taken by the government to bring people having taxable income into the tax net.

They said that the condition of CNIC and the introduction of Tenth Schedule to Income Tax Ordinance, 2001 through Finance Act, 2019 would force a large sum of small traders and retainers to declare their income.

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