Tax on cash withdrawal
|This article does not cite any references or sources. (January 2007)|
This tax is levied on the withdrawal of cash from the bank accounts by the customer. The customer account will be debited to give effect of this tax. This tax helps in documentation of the economy. It helps reducing cash transactions. However, the customer can reduce his tax liability at the end of the year with the amount already paid as advance tax on cash withdrawal from banks.
Section 231A of the Income tax ordinance 2001 of Pakistan is reproduced here which imposes tax on cash withdrawal from the bank account.
231A. Cash withdrawal from a bank
- "(1) Every banking company shall deduct tax at the rate specified in Division VI of Part IV of the First Schedule, if the payment for cash withdrawal, or the sum total of the payments for cash withdrawal in a day, exceeds fifty thousand rupees.
- (2) Advance tax under this section shall not be collected in the case of withdrawals made by,-
- (a) the Federal Government or a Provincial Government;
- (b) a foreign diplomat or a diplomatic mission in Pakistan; or
- (c) a person who produces a certificate from the Commissioner that his income during the tax year is exempt."
The section is giving exemptions to certain person for this tax too. This tax can not be a major source of government earning but it will help in documentation of the economy. The current rate of the tax is 0.3% in Pakistan.
The Indian tax act also provide the same type of withholding tax.
The Finance Act 2013 in Pakistan has made certain changes increased the rate of withholding tax on cashwithdrawal from 0.2% to 0.3%
In budget 2014-15 withholding tax rate was proposed to be increased by 0.2% to make it 0.5% per transaction for transactions above Rs.50,000...but it remained same as last year i.e. 0.3%.
WHT is not applicable on IBFT (Inter Bank Funds Transfer) i.e. if a customer transfers any amount from his bank account to another bank another WHT will not be applied as the money remains in banking system of Pakistan or with the SBP.
|This tax-related article is a stub. You can help Wikipedia by expanding it.|