The government has recently implemented a significant policy change affecting non filers of income tax returns in the country. The policy pertains to the tax rate applicable to bank withdrawals made by non filers a move designed to broaden the tax base encourage filing of income tax returns and bring more transactions into the documented financial system.
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This change underscores the authorities resolve to increase revenue collection promote financial discipline and reduce transactions outside the formal banking sector. The policy is a key component of a broader drive toward greater fairness and equity in the country’s tax framework.
Background of the Policy Change
For years a withholding tax on bank transactions has been in place to track financial activity and bring non filers into the tax net. Traditionally this policy involved deducting a small amount typically 06 from transactions exceeding a certain threshold.
Non filers those who have a National Tax Number NTN but do not submit annual income tax returns were subject to this rate. The policy was meant to serve as a tool to encourage people to become compliant and become part of the formal financial system.
The Recent Change in Tax Rate
Recently the government announced an increase in the withholding tax rate for non filers on bank withdrawals. The rate has been raised from 06 to 09 for transactions exceeding PKR 50000 in a single day.
This change signals a more aggressive approach to bring non filers into the documented fold. The policy aims to make financial transactions more expensive for those who avoid filing their returns and in turn motivate them to become compliant.
Impact on Non Filers
Non filers will now face a higher cost of accessing their own funds in the banking system. Whenever a non filer withdraws more than PKR 50000 in a day the bank will deduct 09 of the amount in excess of this threshold and deposit it directly with the federal revenue authorities.
This policy will affect businesses and individuals who predominantly operate in cash or have transactions routed through their bank accounts without filing proper income tax returns. The additional financial burden may prompt many non filers to reassess their financial practices and become compliant .
Rationale Behind the Change
The main objective of this policy change is twofold
Boost Tax Compliance The higher withholding rate is meant to act as a disincentive for non filers to stay outside the formal financial and tax regimes . The policy signals a clear message non filers will incur additional financial cost thereby nudging them toward filing their income tax returns.
Increase Revenue Collection The policy is expected to contribute to greater revenue collection for the government. The 09 withholding will bring additional funds into the state exchequer and help narrow the fiscal deficit.
Conclusion
The increase in withholding tax on bank withdrawals by non filers reflects the government’s ongoing efforts to broaden its tax base and promote financial discipline. While this policy may affect some businesses and individuals in the short term it aims to foster a more documented and compliant financial culture in the long run .
Non filers are encouraged to submit their income tax returns to avoid paying higher withholding and to become contributors to the country’s economic development. Filling a return not only brings financial benefits in the form of lower transaction charges but also assists the government in designing better policy and delivering improved services to its citizens.