The Federal Board of Revenue (FBR) has asked banks to ensure deduction of 0.6 percent tax from non-filers at the time of sale of any instrument and then cash demand draft, pay order, special deposit receipt; cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveller's cheque or any other instrument. Sources said here on Monday that the FBR Chief Income Tax Policy Malik Amjad Zubair Tiwana has issued instructions to banks on the new withholding tax provisions applicable to banking companies.
According to the FBR communication to banks, by virtue of amendment to Income Tax Ordinance, 2001, through Finance Bill, 2015, new withholding tax provision (Section 236P of the Ordinance) has been introduced requiring every banking company to deduct tax at the rate of 0.6 percent from non-filers at the time of sale of any instrument, and then cash demand draft, pay order, special deposit receipt, cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveller's cheque or any other instrument of such nature.
Banks would also deduct tax at the rate of 0.6 percent from non-filers at the time of transfer of any sum through cheque or clearing, interbank or intra bank transfers through cheques, online transfer, telegraphic transfer, mail transfer, direct debit, payments through internet, payments through mobile phones, account to account funds transfer, third party account to account funds transfers, real time account to account funds transfer, real time third party account to account fund transfer, automated teller machine (ATM) transfers, or any other mode of electronic or paper based funds transfer.
The FBR said that the bank account from where transfer is being made (through cheque, online or online banking or any other mode) shall be debited by the amount equivalent to 0.6 percent of payment, at the time transfer is made. However, in case an account is being closed through a clearing transaction or there being no balance in the account on transfer, the bank shall make the deduction of tax from the amount being transferred and the balance after deduction shall be transferred.
Banks have been further informed that the provision which comes into force w.e.f. July 1, 2015 shall not be applicable to PRISM transactions or transfers for tax payments. Similarly, no tax shall be deductible where the value of sale of instruments or amount being transferred is Rs 50,000 or less in a single day.
The FBR said that an amendment in section 231A has also been made whereby rate for non-filers has been increased from 0.5 percent to 0.6 percent. Section 231AA has also been amended to increase the rates for non-filers from 0.3 percent to 0.6 percent. It may also be mentioned that at the time of sale of instruments against cash under section 231 AA, tax is to be collected even from filers at the rate of 0.3 percent and basic threshold in this case is Rs 25,000 in a day, the FBR maintained.
By virtue of another amendment, a new Section 236R of the Income Tax Ordinance, 2001 has also been introduced in the Income Tax Ordinance, 2001 requiring every banking company, financial institution, foreign exchange company or any other person responsible for remitting foreign currency abroad to collect advance income tax from the payer of education related expenses, at the rate of 5 percent of the amount being remitted abroad, the FBR added.
In view of the above, bank's co-operation would be highly appreciated in fulfilling legal obligations in respect of above amendments. The FBR has further requested to affect the changes required in the system, if any, so that the amendments be implemented in letter and spirit with effect from July 1, 2015, the FBR said.