.svg){kind=small}
%402x.svg){kind=small}
Background:
Section 231A of the Income Tax Ordinance, 2001 (the Ordinance) was omitted by the Finance Act 2021 and the exemptions related to section 231A were also omitted by the Finance Act 2021. The omitted exemptions from Part IV, Second Schedule of Income Tax Ordinance, 2001 are reproduced below:
Clause (61) The provisions of section 231A shall not apply in respect of any cash withdrawal, from a bank, made by an earthquake victim compensation from the government, including Earthquake Reconstruction & Rehabilitation Authority (ERRA) payments
Clause (61A) The provisions of section 231A shall not apply in respect of any cash withdrawal by:
a) Exchange companies withdrawing from accounts dedicated to authorized business transactions, subject to an exemption certificate from the Commissioner; and
Clause(101) The provisions of section 231A shall not apply on withdrawals from Branchless Banking (BB) Agent Accounts used for branchless banking services.
Clause(101A) The provisions of section 231A shall not apply to a Pak Rupee account if the deposits are made solely from foreign remittances credited.
Clause(101AA) The provisions of sections 231A, 231AA and 236P shall not apply to a Pak Rupee Account in a tax year to the extent of foreign remittances credited into such account during that tax year.
Clause(112A) The provisions of section 231A, 231AA and 236P shall not apply to theholders of Foreign Currency Value Account (FCVA) or Non-resident PKR Account (NRPRVA) in respect of these accounts only.
All the above exemptions were omitted by the Finance Act, 2021. The Finance Act, 2023 has reintroduced tax collection on cash withdrawals from non-ATL persons by Banks and a new section 231AB has been introduced, requiring every banking company to deduct tax @ 0.6% from a person whose name is not appearing in ATL, at the time of making payment for sum total of cash withdrawal (aggregate cash withdrawal) in a single day exceeding Rs. 50,000/-.
However, the exemptions related to the reintroduced section have not been restored therefore in our opinion, the exemptions (omitted) related to omitted section 231A of the Ordinance cannot be extended to the section 231AB of the ordinance as the exemptions do not exist now.
Moreover, following persons have been excluded from section 231AB through Circular No. 02 of 2023, Islamabad, 26July 2023:
- The Federal Government or a Provincial Government;
- A foreign diplomat or a diplomatic mission in Pakistan; or
- A person who produces certificate from the commissioner that his income during the tax year is exempt.
Disclaimer:
This Tax update provides a broad overview and should not replace detailed analysis or professional judgment.
Reference/ Citation
https://download1.fbr.gov.pk/Docs/20236261762031274FinanceAct,2023.pdf
