KARACHI: The Federal Board of Revenue saw withholding tax collection on cash withdrawal from banks increase seven percent during the first half of the current fiscal year of 2020/21 as resurgence in economic activities offset the concessions on levy given to active taxpayers, sources said on Friday.
According to statistics of Regional Tax Office Karachi, which has jurisdictions over collection of withholding tax on cash withdrawal from banking system, the collection under the head increased to Rs4.2 billion during the first half of the current fiscal year compared with Rs3.9 billion in the corresponding period of the last fiscal year.
The withholding tax is applicable under a section (231A) of Income Tax Ordinance, 2001 at the rate of 0.6 percent on taxpayers whose names are not on the ATL.
The sources said the levy remained applicable at the reduced rate of 0.3 percent on those appearing in the ATL. However, through the Finance Supplementary (Second Amendment) Act 2019, the levy of 0.3 percent was abolished.
The government withdrew 0.3 percent withholding tax on the taxpayers who are filing their income tax returns and appearing on the ATL to facilitate the compliant taxpayers and reduce cost of financial transactions.
The sources said the negative impact of abolishing 0.3 percent is very high. However, revival of economic activities during the first half of the current fiscal year increased the demand for cash-based transactions.
The government lifted the coronavirus lockdown in June last year. The impact of coronavirus lockdown was very severe as GDP growth registered negative growth of 0.4 percent during the fiscal year of 2019/20. However, after lifting of the lockdown the economy witnessed recovery. The growth is projected to come back at 1.5 percent during the current fiscal year.
The second wave of the coronavirus has again forced people to keep money in the banking system. The deposits of the banking system increased to a record high of Rs17.9 trillion as of December last year. The deposits increased 22.1 percent when compared with Rs14.6 trillion a year earlier, according to data released by the State Bank of Pakistan.
The collection of cash withdrawal during the month of December remained buoyant. The collection under the head posted a growth of 22 percent to Rs953 million in December. That was compared with Rs782 million in the same month of the last year.
Source: The News