ISLAMABAD (July 17 2010): The Federal Board of Revenue has announced that the withholding tax on banking transactions would not be applicable on online transmission of day-to-day collections to centralised account of a distributor, where the depositor and the beneficiary is the same under cash management arrangements provided by a bank.
This cash management arrangement of the banks shall be treated as "interbank transfer". An income tax circular issued here on Friday clarified that the tax would not be collected on transactions made by a person who produces a certificate from the Commissioner that his income during the tax year is exempt.
The FBR has further clarified that the withholding tax on transactions in banks shall be chargeable only on purchase through cash of banking instruments including Demand Draft, Pay order, Call Deposit Receipt (CDR), Special Deposit Receipt (SDR), Short Term Deposit Receipt (STDR), Rupee Traveller Cheque (RTC) and any other instrument of bearer nature.
A new section 231AA has been introduced in the Income Tax Ordinance, 2001.Banking transactions shall be charged to adjustable advance tax. This tax shall be collected on cash sale of any of the abovementioned instrument by any banking company; non-banking financial institution; exchange company or any authorised dealer of foreign exchange. Such tax shall also be deductible on transfers against cash including on line transfer, telegraphic transfer, mail transfer and any other mode of electronic transfer.
This tax shall also be charged on payment if made in cash on cancellation of any of the instruments referred above in cases where tax is not withheld on preparation of such instrument against cash. This tax shall only be charged where total amount of payments for said transactions exceeds Rs 25,000 in a day.
This tax shall not be collected on payment made through a crossed cheque for purchase of any of the financial instrument as referred above, interbank and intra-bank transfers, transactions made by the Federal or a Provincial Government; transactions made by a foreign diplomat or a diplomatic mission in Pakistan and transactions made by a person who produces a certificate from the Commissioner that his income during the tax year is exempt and online transmission of day to day collections to centralised account of a distributor, where the depositor and the beneficiary is the same maintained under cash management arrangements provided by a bank, shall be treated as interbank transfer. Tax deducted under this section shall be adjustable against overall tax liability of the taxpayer and tax deducted under the provisions of this section shall be deposited to the relevant Commissioner Inland Revenue as required under the Law, income tax circular added.
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This cash management arrangement of the banks shall be treated as "interbank transfer". An income tax circular issued here on Friday clarified that the tax would not be collected on transactions made by a person who produces a certificate from the Commissioner that his income during the tax year is exempt.
The FBR has further clarified that the withholding tax on transactions in banks shall be chargeable only on purchase through cash of banking instruments including Demand Draft, Pay order, Call Deposit Receipt (CDR), Special Deposit Receipt (SDR), Short Term Deposit Receipt (STDR), Rupee Traveller Cheque (RTC) and any other instrument of bearer nature.
A new section 231AA has been introduced in the Income Tax Ordinance, 2001.Banking transactions shall be charged to adjustable advance tax. This tax shall be collected on cash sale of any of the abovementioned instrument by any banking company; non-banking financial institution; exchange company or any authorised dealer of foreign exchange. Such tax shall also be deductible on transfers against cash including on line transfer, telegraphic transfer, mail transfer and any other mode of electronic transfer.
This tax shall also be charged on payment if made in cash on cancellation of any of the instruments referred above in cases where tax is not withheld on preparation of such instrument against cash. This tax shall only be charged where total amount of payments for said transactions exceeds Rs 25,000 in a day.
This tax shall not be collected on payment made through a crossed cheque for purchase of any of the financial instrument as referred above, interbank and intra-bank transfers, transactions made by the Federal or a Provincial Government; transactions made by a foreign diplomat or a diplomatic mission in Pakistan and transactions made by a person who produces a certificate from the Commissioner that his income during the tax year is exempt and online transmission of day to day collections to centralised account of a distributor, where the depositor and the beneficiary is the same maintained under cash management arrangements provided by a bank, shall be treated as interbank transfer. Tax deducted under this section shall be adjustable against overall tax liability of the taxpayer and tax deducted under the provisions of this section shall be deposited to the relevant Commissioner Inland Revenue as required under the Law, income tax circular added.
-www.brecorder.com
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