Reduced rate of advance tax on Banking Transactions by non-filers
[Division XXI of Part IV of the First Schedule]
Advance tax on Banking Transactions by non-filers: Prior to the Finance Act, 2018 every banking company, in terms of section 236P of the Income Tax Ordinance, 2001 was obliged to collect advance adjustable tax @0.6% from non-filers upon sale of instruments such as demand draft, pay order, special deposit receipt, cash deposit receipt, short term deposit receipt, call deposit receipt, rupee traveller’s cheques etc in excess of Rs.50,000/- per day.
Similarly, collection of such adjustable advance tax @ 0.6% from non-filers by banks was also mandated upon transfer of funds through cheque/clearing, inter/intra-bank transfers through cheques, online/telegraphic/mail transfers, direct debits, payments through internet, mobile phones and transfer of funds through various modes as delineated under section 236P of the Ordinance in case such transfers exceeded Rs.50,000/- per day (in aggregate) from all bank accounts.
The rate of tax under section 236P of the Ordinance was temporarily reduced to 0.4% and was extended periodically pursuant to the recommendation of the Economic Coordination Committee of the Cabinet.
Through the Finance Act, 2018 the rate of tax applicable under section 236P of the Ordinance has been reduced from 0.6% to 0.4%, therefore, extension of reduced rate of 0.4% under section 236P is no longer required.