What are the Revised Tax Rates for Filers and Non-Filers

What are the Revised Tax Rates for Filers and Non-Filers. In the recent budget announced by the Government of Pakistan the rates of income tax have been increased under various sections of Income Tax Ordinance 2001 for filers as well as for non-filers.

In some cases rates of income tax have been increased to double and in some cases by three times. The simple way to avoid these double and three times tax rates as compare to normal rates is to become active tax filer with FBR.

Federal Board of Revenue (FBR) has revised tax rates for non-filers to enhance the tax collections in the country. This will also increase the tax net in Pakistan which will have a positive impact on the economy.

It will also help to the tax authority in Pakistan to bring more and more citizens in tax net by making compliance and filing tax returns. It is also a need of the hour to increase the filers that will ultimately enhance the collection of taxes.

New Tax Rates for Filers and Non-Filers

Let us discuss the areas where such tax rates have been revised:

Withholding Tax on Cash Withdrawals from Banks:

In the recent budget announced by the Government of Pakistan there will be no tax deduction on cash withdrawals below Rs50,000 per day. However, 0.6 per cent tax deduction from non-filers will be applicable on cash withdrawal of more than Rs50,000 per day.

According to circular No 2 issued by FBR on 26th July 2023: The Finance Act,2023 reintroduced withholding tax collection on cash withdrawals from Non-filers by Banks. For this purpose a new section 231AB recently introduced through Finance Act 2023. According to section 231AB every banking company is required to deduct advance adjustable tax @ 0.6 percent from a person whose name is not appearing in the Active Taxpayer List.

This tax will be applicable if aggregate cash withdrawal in a single day exceeding Rs.50,000/-. Moreover, cash withdrawals made from both credit cards or from ATMs will also cover by this section. Further, if cash withdrawal exceeds Rs50,000 in a single day then such tax will apply on whole amount.

Exemptions are available to the Federal Government or a Provincial Government; a foreign diplomat or a diplomatic mission in Pakistan; or a person who has exemption certificate from the FBR (Commissioner) that his income during the tax year is exempt.

Advance Tax on Motor Vehicles

Before Finance Act 2023, the collection of fixed amount of withholding tax by the withholding agent applies under section 23IB of the Income Tax Ordinance 2001. Motor registration authority Collects at the time of purchase or registration of motor vehicle with engine capacity of 2001 cc and above.

However, through Finance Act, 2023, such fixed amount of withholding tax on vehicles with engine capacity of 2001cc and above replaced with collection of tax at different rates. These tax rates are 6 percent ,8 percent and 10 percent of the value of motor vehicle having engine capacity of 2001cc to 2500cc, 2501cc to 3000cc and above 3000cc respectively.

The above rates are for persons whose names are on active taxpayer list. However, in case person’s name is not on active taxpayer list then the rates will be increased by two hundred percent. So, rates for non-filers will 18 percent, 24 percent and 30 percent respectively.

How to Determine the value of vehicle for tax purpose

The value of the motor vehicle for such tax will determine as per the following:

Imported vehicle: In case of imported vehicle the import value assessed by the Customs authorities as increased

• by customs duty,
• federal excise duty and
• sales tax payable at import stage.

Vehicle manufactured or assembled locally in Pakistan: The invoice value inclusive of all duties and taxes.

Auctioned Vehicle: In case of the auctioned vehicle the value for such tax rate will be auction value inclusive of all duties and taxes.

Moreover, FBR explained in the circular issued, that where engine capacity is not applicable and the value of vehicle is Rupees five million or more. Then the rate of tax to be collectible will be 3 percent of the import value as increased by:

• customs duty,
• sales tax
• and federal excise duty in case of imported vehicles

or invoice value in case of locally manufactured or assembled vehicles.

Revised Withholding Tax Rates on Sale and Purchase of Immovable Property

As per the Finance Act 2023, the rates of withholding tax applicable on sale and purchase of immovable property recently revised both for filer and non-filer.

According to the circular issued by the FBR on 26th July 2023, the WHT rate on purchase of property increased from 2 percent to 3 percent for filers. Further for non filers such tax under section 236K increased from 7 percent to 10.5 percent of the fair market value of the property.

Moreover, on the sale of immovable property tax rate increased from 2 percent to 3 percent for filers. For non filers tax rate under section 236C increased from 4 percent to 6 percent. Such tax will apply on the amount or proceeds received against sale of property.

Tax on Payments to Non-Residents through Debit/Credit Cards

Government has also revised tax rates on payments to non-residents through debit/credit cards. This step toke by the government in order to discourage unnecessary outflow of foreign exchange reserves. So, withholding tax rates under section 236Y of the Income Tax Ordinance, 2001 recently increased as under through Finance Act, 2023:

• from 1 percent to 5 percent for filers and
• from 2 percent to 10 percent for non-filers persons