Withholding tax collection from profit on bank deposits has surged by a massive 204% to Rs. 21.6 billion during the first five months of the current fiscal year, compared to Rs. 7.1 billion in the corresponding period of the last year, said a report.
A major factor that drove the increase was the higher interest rates, which improved returns on investment. The State Bank of Pakistan kept the discount rates unchanged at 13.25% in the last monetary policy.
According to the sources quoted by the report, the Federal Board of Revenue (FBR) started scrutinizing the incomes following an extraordinary increase in earnings from bank deposits.
The report stated that the deposits in the banking system had increased to Rs. 14.31 trillion by November 2019, showing an increase of 9.48% as compared with Rs. 13.07 trillion in the same month last year.
The sources said that FBR will obtain information from banks about individuals with large deposits. The banks are required to provide a list to FBR which will have particulars of deposits aggregating Rs. 10 million or more made during the month to tax authorities. They are also liable to provide a list of individuals receiving profit exceeding Rs. 500,000 per year.
Initially, FBR is inquiring about specific cases from the banks where its tax offices discovered undisclosed amounts on which the profit was received.
It is to be noted that the banks were required to provide details of transactions on a monthly basis. However, banks are now required to provide details biannually with the amendment introduced to Income Tax Ordinance 2001.
Therefore, banks will provide details of deposits in their withholding statements which will be submitted in January 2020.