The Federal Board of Revenue (FBR) in Pakistan has raked in Rs 10 billion in tax revenue during the first ten months of the current fiscal year (ending June 2024). This tax is specifically collected from individuals withdrawing cash from banks, and only in Karachi so far.
Who Pays This Tax?
This tax applies to individuals who are not registered on the Active Taxpayers List (ATL) and who make large cash withdrawals from banks. Here’s the breakdown:
- Tax Rate: 0.6% on cash withdrawals exceeding Rs. 50,000 in a single day.
- Application: This tax is deducted not just for direct cash withdrawals but also applies to withdrawals made through ATMs or credit cards.
Important Note: This tax is considered an advance tax payment and can be adjusted against the individual’s final tax liability for the year.
Who is Exempt?
- The Federal Government, Provincial Governments, and foreign diplomats or missions in Pakistan are exempt from this tax.
- Individuals who can present a certificate from the Commissioner verifying their income is exempt for the tax year are also excluded.
Why This Tax?
The FBR aims to achieve two objectives through this tax:
- Increase Tax Compliance: By targeting non-filers who make substantial cash withdrawals, the FBR hopes to encourage them to register on the ATL and become part of the tax system.
- Broaden the Tax Base: Including this tax widens the net of taxpayers, potentially leading to a more robust tax collection system.
Looking Ahead:
With Karachi alone generating Rs. 10 billion, the national collection figure for this tax is expected to be significantly higher once data from Islamabad and Lahore is included. As the fiscal year concludes, the FBR anticipates a substantial contribution to the national treasury from this tax measure.
Staying Informed:
Taxpayers and stakeholders are advised to stay updated on these regulations to ensure compliance and avoid penalties. The FBR is actively working towards a more efficient and equitable tax system in Pakistan.
