Central Board of Revenue (CBR) Chairman Abdullah Yusuf has said that CBR is ready to issue clarification to further streamline the collection procedure of 0.1 percent withholding tax on cash withdrawals of over Rs 25,000 keeping in view the recommendations of Pakistan Banks Association (PBA).
He told Business Recorder on Tuesday that in principle, there is no change in the scheme and the Income Tax Department would further clarify the levy, if required to remove any practical difficulties being faced by the banks during collection of 0.1 percent withholding tax on cash withdrawals.
He said that the CBR and the representatives of the concerned association discussed the operational mechanism of the scheme as notified through the income tax circular. "It was a sort of discussion between the banks and the CBR to clarify the queries raised by them. However, there is no change in the tax deduction mechanism," Abdullah added.
Meanwhile, a high-level delegation of bankers from Karachi has endorsed the CBR circular on the applicability of 0.1 percent withholding tax on cash withdrawals of over Rs 25,000.
Pakistan Banks Association (PBA), an official body of the commercial banks, met Abdullah Yusuf, CBR Member Income Tax Salman Nabi on Tuesday to discuss in detail the CBR Circular Number 4 of 2005 for clarification of various issues pertaining to withholding tax levied on cash withdrawals and other taxation issues relating to the banks.
The PBA, while giving its no objection to the basic law - Section 231 A of Income Tax Ordinance 2001 - raised several questions about Circular No 4-2005 of Income Tax Department which explained the law regarding tax on cash withdrawals. The association also raised legal issues about advance income tax levied on various forms of cash withdrawals.
Sources said that a three-member delegation of bankers agreed on all the provisions of Circular 4 of 2005 and accepted that the scope of Section 231-A of the Income Tax Ordinance 2001 has not been extended by the Board.
The representative of the banks and Abdullah Yusuf discussed the circular in detail convincing the bankers that the withholding tax is only to be levied on the cash withdrawals from the banks and other forms as per the provisions of the circular.
Explaining the levy of withholding tax on withdrawal from ATMs for meeting day-to-day requirements, the CBR officials said that the withdrawal limit per day is usually below Rs 25,000 and, therefore, withdrawals for day-to-day requirements by default do not attract withholding tax.
However, in case cash withdrawal per transaction exceeds Rs 25,000, withholding tax would be attracted.
The meeting also discussed whether the "cash withdrawal" could be equated to 'issuance' or 'encashment' or 'redemption' of various financial instruments.
The CBR has also clarified that the withholding tax will not be applicable on cash withdrawals by banks from accounts maintained with sub-treasury for their day-to-day cash requirements, the sources added.
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