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August 11, 2020

WHT collection on non-cash banking transactions fall 40 percent in July

Business

August 11, 2020

KARACHI: The Federal Board of Revenue (FBR) pulled in Rs447 million on withholding tax from non-cash banking transactions in July, down 40 percent year-on-year, as taxpayers increasingly preferred to file returns to duck the punitive tax, official data showed on Monday.

The FBR collected Rs745 million on account of withholding tax from non-cash banking transactions in the same month a year earlier, as filing of income tax returns improved, the data showed. Individuals making bank-to-bank money transfers opted to file income tax returns and become part of the active taxpayers list (ATL) to avoid paying additional tax. The withholding tax on non-cash transactions is applicable at 0.6 percent only on accountholders, who don’t appear on ATL.

Collection under the head during the current fiscal year is expected to decline due to various incentives and amenities announced by the government to document undocumented economy, which is a parallel to the documented one. The government envisaged a highly ambitious annual tax collection target of Rs4.9 trillion in budget 2020/21 as against the revised estimate of Rs3.9 trillion for the last fiscal year.

The FBR requires 27 percent growth in taxes in next fiscal year for achieving the target amid the economic slowdown worsened by the COVID-19. The FBR’s collection marginally increased around 4 percent to Rs3.9 trillion last fiscal 2019/20 as compared to Rs3.8 trillion in FY19.

The number of return filers for the tax year 2019 increased to almost 2.75 million, according to the official data. The ATL for tax year will remain applicable till February 28, 2021 for the purpose of deduction of withholding tax under various provisions of the Income Tax Ordinance, 2001.

The number of return filers in tax year 2018 was around 2.9 million. The number of return filers will increase last year, as the filing would remain permissible till February 28, 2021 along with fine and penalties.

The government introduced the withholding tax provision through Finance Act 2015 and a new section 236P was inserted into Income Tax Ordinance, 2001. Under this provision, 0.6 percent withholding tax was imposed only on non-filers of income tax returns on aggregate transactions of Rs50,000 per day. The provision was aimed at increasing burden on non-filers The government faced opposition from various quarters after the introduction of the law. Previously, the income tax return filing was mandatory for appearing on the ATL. But in the latest arrangement a person will only appear on the ATL if he files annual return by due date.