Non-cash bank transactions generate Rs4.68bln tax in 7M

KARACHI: The collection of withholding income tax from non-cash banking transactions increased 8 percent to Rs4.68 billion in the first seven months of fiscal year 2020/2021, despite virus lockdown led economic holdup, officials said on Friday.

The collection under this head came out at Rs4.32 billion in the corresponding months of the last fiscal year, according to official statistics of Large Taxpayers Office (LTO) Karachi.

The officials at the LTO Karachi said this growth was significant because economic activities had been quite insignificant during the period.

They however added that the ease in coronavirus restrictions revived commercial and industrial activities, which ultimately improved transactions in the banking system.

The deposits of the banking system improved 16.5 percent to Rs17.085 trillion by end of January 2021, compared to Rs14.672 trillion in the same month last year.

Withholding tax was imposed on persons making banking transactions other than cash that had not filed their annual income tax returns and were not on the Active Taxpayers List (ATL), the officials said The withholding tax on non-cash transactions is applicable at 0.6 percent only on those persons, who do not appear on the ATL.

They said that despite a significant increase in the number of active taxpayers the withholding tax collection registered a handsome growth.

The number of return filers for tax year 2019 increased to a record high of 3.1 million. The ATL for the 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 government introduced the withholding tax provision through Finance Act, 2015 and a new Section 236P was inserted into Income Tax Ordinance, 2001. The provision was aimed at increasing the burden on persons not filing income tax returns.

The collection of withholding tax on non-cash banking transactions increased 5 percent to Rs651 million in January 2021 as compared with Rs620 million in the same month of the last year.