The Federal Board of Revenue (FBR) has collected Rs24 billion as withholding tax (WHT) on purchase of immovable properties during tax year 2020.
According to collection statistics for tax year 2020 released by the FBR, the withholding tax collection on purchase of immovable properties increased to Rs24 billion as compared to Rs13.50 billion in the preceding fiscal year, showing an increase of 78 percent.
The collection of withholding tax on purchase of immovable properties is made under Section 236K of the Income Tax Ordinance, 2001. Prior to Finance Act, 2019, the withholding tax rate was at zero percent where value of immovable property was up to Rs4 million. Withholding tax at two percent for income tax return filers was to be collected where the value of immovable property is more than Rs4 million. However, at this value of immovable properties the withholding tax for non-filers was prescribed at 4 percent.
However, through the Finance Act, 2019 the withholding tax rate was amended to one percent on fair market value of the immovable properties purchased during tax year 2020 and onwards in case the purchase is on the Active Taxpayers List (ATL). The rate of withholding tax in case a person is not on the ATL is 2 percent.
Meanwhile, the income tax collection on cash withdrawal from the banking system fell by around 52 percent during tax year 2020 following return filers allowed tax free transactions, revealed the statistics released by the FBR. The collection of income tax under Section 231A of Income Tax Ordinance, 2001 was at Rs15.17 billion as compared with Rs31.75 billion in the preceding tax year.
Prior to March 2019, the persons filing income tax return and on the Active Taxpayers List (ATL) were liable to pay 0.3 percent on cash withdrawal above Rs50,000 in a day from the banking system. However, the persons not on the ATL were required to pay 0.6 percent on the cash withdrawal above Rs50,000 in a day.
Through Finance Supplementary (Second Amendment) Act, 2019 amendment was made to Section 231A Income Tax Ordinance, 2001 and persons on the ATL were exempted from paying 0.3 percent income tax on making cash withdrawal above Rs50,000.
The levy of withholding income tax on cash withdrawal was introduced through Finance Act, 2005. Initially the tax was payable on withdrawal of above Rs25,000 per day. But through Finance Act, 2012 the limit was increased to Rs50,000. According to Section 231A of the Income Tax Ordinance, 2001 every banking company shall deduct tax, if the payment for cash withdrawal, or the sum total of the payment for cash withdrawal in a day, exceeds fifty thousand rupees. The FBR clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.