Budget makers are reviewing proposals to promote branchless banking in the upcoming budget (2017-18), it is learnt. Sources told Business Recorder here on Wednesday that under the National Financial Inclusion Strategy (NFIS), the government wants to promote branchless banking. A proposal is under consideration to amend Income Tax Ordinance 2001 for adjustment of withholding tax on cash withdrawals by branchless banking (BB) agents.
In the past, issue of adjustment of withholding tax on cash withdrawals by branchless banking agents was discussed during the last meetings of National Financial Inclusion Strategy (NFIS) Steering Committee. According to details, BB agents conduct banking transactions on behalf of their customers and such transactions are being settled on a daily basis which attracts withholding tax when withdrawals exceed Rs 50,000 limit. It was, therefore, recommended to the NFIS council that Federal Board of Revenue (FBR) may consider adjustment of withholding tax on cash withdrawals by BB agents to the extent of disbursements made to the clients.
A detailed proposal was developed in consultation with the industry and was shared with the FBR. Subsequently a meeting of concerned stakeholders ie banks, Finance Division and FBR was held wherein FBR principally agreed on the recommendation.
The NFIS Council in its last meeting reviewed the said recommendation and advised that FBR may consider subject to the conditions that agents shall maintain separate accounts for the BB transactions and such transactions would be verifiable and the aggregate withdrawal by per person per day will not exceed Rs 50,000. The chairman NFIS Council also advised that the proposed amendment in income Tax Ordinance for adjustment of withholding tax on BB agents may be adopted through Finance Bill 2017-18 at the time of budget.
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