Withholding tax collection rises 14 percent to Rs1.128 billion
KARACHI: The withholding tax collection from non-cash banking transactions has posted 14 percent growth; following introduction of an amendment through the Finance Supplementary Act, 2018.
The collection of withholding tax from non-cash transactions, which is applicable only on non-filers of income tax returns, increased to Rs1.128 billion in December 2018, compared with Rs988 million in the same month of the last fiscal year, showing a growth of 14.17 percent.
The present government through the Finance Supplementary Act, 2018 enhanced the withholding tax rate on non-cash banking transactions to 0.6 percent from 0.4 percent after facing significant revenue shortfall.
The improvement in collection under this head is visible as compared to the figures for the first half of the current fiscal year.
The collection during the first quarter (July–September) of the current fiscal year posted a decline of 14 percent, as it was at Rs2.21 billion, as compared to Rs2.56 billion in the same quarter of the last fiscal year.
However, with the rate increase, the collection climbed up by 11.52 percent in the next quarter (October–December) of the current fiscal year to Rs3 billion.
Therefore, the aggregate collection for the first half under this head showed a minor decline of one percent to Rs5.21 billion, compared with Rs5.254 billion in the same period of the last fiscal year.
A provision of Section 236P was introduced to the Income Tax Ordinance, 2001 through the Finance Act, 2015, making it mandatory for the financial institutions to collect / deduct 0.6 percent on transaction of amount above Rs50,000/day from non-filers of income tax returns.
The stakeholders protested the imposition of higher rates on non-filers and compelled the government to reduce it. The government temporarily reduced the rate to 0.4 percent, which was remained applicable till June 30, 2018.
However, the previous government made the rate of 0.4 percent as part of the statute through the Finance Act, 2018 or Budget 2018/19. Sources in the Federal Board of Revenue (FBR) said the implementation of the provision had resulted in increased annual income returns filing.
The number of return filers increased to around 1.79 million as per the latest weekly updated list of the Active Taxpayers List (ATL), which was only 0.87 million in 2013.