Banks introduce a withholding tax when withdrawing cash

 by web desk

Banks introduce a withholding tax when withdrawing cash

Karachi, July 14, 2023 – In line with the recently implemented amendment to the Income Tax Ordinance 2001 through the Finance Act 2023, banks have started deducting withholding tax on cash withdrawals exceeding Rs 50,000 in a single day.

Banking sources have confirmed that the deduction is effective from July 1, 2023. However, this advance tax deduction applies only to individuals who are not on the Active Taxpayer List (ATL) for the 2022 tax year.

By virtue of the new amendment, a new section 231AB has been added to the Income Tax Ordinance, 2001. According to this provision, every banking company is required to deduct an advance adjustable tax of 0.6 percent from the total amount of cash. withdrawals exceeding fifty thousand rupees per day from individuals who are not on the list of active taxpayers.

To clarify, the said fifty thousand rupees represents the cumulative cash withdrawals made in a single day.

Notably, the cash withdrawal provision was originally removed through the Finance Bill 2021. However, it was reintroduced as a means of encouraging individuals to disclose their income and assets by filing annual tax returns.

Banks will deduct withholding tax on cash withdrawals on behalf of the Federal Board of Revenue (FBR). In the fiscal year 2020-21, the FBR collected an amount of Rs 15.14 billion through this tax, which was in line with the collection in the previous fiscal year.

The aim of introducing this withholding tax is to encourage greater tax compliance among individuals and to discourage the circulation of undeclared income.

FBR freezes bank accounts of top traders, bankers to restore CVT

by web desk 

KARACHI: The Federal Board of Revenue (FBR) has attached the bank accounts of top businessmen and bankers in the country for recovery of capital value tax (CVT) on properties abroad.

FBR sources said on Friday that recovery notices have been issued to at least 15 super-rich individuals through attachment of bank accounts. These persons have immovable property outside Pakistan and are liable to pay CVT.

An official of the Large Tax Payers Office (LTO) Karachi told PkRevenue that the FBR has taken action against 15 super rich individuals across the country. Out of 15 persons, LTO Karachi has jurisdiction over eight persons.

Sources said the bank accounts of 15 people were attached for CVT recovery. "An amount of Rs 450 crore can be recovered from such persons," sources said, adding that the drive was initiated on the instructions of the prime minister.

The Prime Minister ordered the tax authorities to ensure the collection of taxes from non-payers.

The CVT was imposed through the Finance Act, 2022 at one per cent of the value of a resident's foreign assets if the value of those assets as on the last day of the tax year in the aggregate exceeds Rs 100 crore.

According to the FBR, an inclusive definition of foreign assets has been provided which inter alia includes assets held abroad indirectly and beneficially owned by a resident.

“The value of the foreign assets shall be the total price of the foreign assets as on the last day of the tax year in the relevant foreign currency, converted into rupees at the rates of exchange notified by the State Bank of Pakistan (SBP) for the said day.

 “In case the price of the foreign assets cannot be determined with reasonable accuracy, the fair market value as on the last day of the tax year shall be used for the purpose and rupee conversion shall be used as above. A resident holding foreign assets will pay the CVT at the time the income tax return is due for the tax year,” the FBR said.

He further added that the Inland Revenue Officer has been empowered to issue appeals to recover the CVT along with late fee from a person who fails to pay the CVT or collects the CVT or fails to pay in favor of the Federal Government after having collected the CVT by making the person in in this respect will bear personally.

Sources said the FBR is likely to release all the names of CVT defaulters in the coming days.