Non-cash banking transactions tax up 54pc

KARACHI: Income tax collection from non-cash banking transactions surged 54 percent year-on-year to in October, as economic activities continued to post recovery after monthslong lockdown, official data showed on Thursday.

The collection of tax on non-cash banking transactions amounted to Rs907 million in October compared to Rs587 million in the corresponding month a year earlier.

Improved industrial and commercial activities during the month increased the value and volume of financial transactions.

The government introduced the withholding tax provision through Finance Act 2015 and a new section 236P was introduced into the Income Tax Ordinance 2001. The amendment aimed at to discouraging non-filing of tax returns.

The Federal Board of Revenue imposed 0.6 percent of advance income tax on such banking transactions other than made through cash. This levy is for the taxpayers who are not on the active taxpayers list (ATL).

Since the introduction of the legal change the collection of advance tax has been gradually declining owing to additional burden on non-filers, according to sources in Large Taxpayers Office Karachi.

The sources said the levy resulted in a record number of income tax returns. According to the latest weekly ATL, the FBR received a record number of returns of 2.92 million for tax year 2019.

The collection of advance income tax has also registered 12 percent growth to Rs2.7 billion during the first four months (July-October) of FY2021. That was compared with Rs2.4 billion in the same period of the last fiscal year.

During the first four months of the current fiscal year the economic activities accelerated due to lifting of coronavirus related lockdown.

The sources said the collection under the head in coming months might not maintain the pace because of resurgence in coronavirus cases in the country. Expected lockdown or smart lockdown may result in closure or restricted timing of commercial and industrial activities, they added.