Federal Board of Revenue (FBR) is considering an exemption for withholding tax on cash withdrawals through branchless banking agents.
The tax exemption is applicable on agents operating under the Asaan Mobile Account Scheme, to encourage and promote digital banking mediums.
This exemption has been in demand for a very long time from the branchless banking agents as they had to suffer extra costs upon each withdrawal above Rs. 50,000.
It will encourage digital payments in Pakistan and will aid in the achievement of the long-term goals of the National Financial Inclusion Strategy.
In a nutshell NFIS is:
A strategy for building a dynamic and inclusive financial sector to support Pakistan’s growth in the 21st century.
The strategy highlights the increase in volume and value of branchless banking in its clauses. It also justifies why digital media should be encouraged in the development of the country’s infrastructure in the long term.
According to the clauses:
While there are 120 million SIM card holders in Pakistan, only 7% of Pakistani adults had used mobile money either through their own or others’ accounts. Just 0.4% of adults had registered mobile money accounts.
However, the rate at which branchless banking is being used is growing significantly.
The exemption of withholding tax is one of the many steps needed to promote the use of branchless banking and for the long-term effects of the National Financial Inclusion Strategy to bear fruit.
Under this strategy, Asaan Mobile Account (AMA) scheme was approved back in January as this scheme will help build the ecosystem of digital financial services in Pakistan.
At present, tax is charged at 0.3% for filers and 0.6% for non-filers upon withdrawals of more than Rs. 50,000 per day.
