The Presidents/ Chief Executives
All Banks,

Dear Sirs / Madam,

DEDUCTION OF WITHHOLDING TAX ON CASH WITHDRAWAL

In terms of Para 6 of the CBR’s Circular No.1 (6)WHT/2006 of June 27, 2006, the rate of withholding tax has been enhanced from 0.1% to 0.2% of the amount withdrawn. Furthermore, the limit of Rs.25,000/- per transaction has been changed to per day basis.

2) It has been observed that while implementing the above instructions of CBR, banks are deducting withholding tax from their customers by clubbing cash withdrawal transactions done on different dates into a single posting date. This has resulted into excessive deduction of tax in some instances.

3) In order to address this issue banks are advised to immediately discontinue the practice of clubbing cash/ATM transactions done on different dates into single posting date for the purpose of determining the amount of withholding tax on such transactions. In case it is required, banks should make necessary amendments in their IT systems. Furthermore, the excess amount of withholding tax, if any, deducted from the customers should be refunded to them.

4) All the banks are advised to ensure compliance with the above instructions failing which action will be taken under the relevant provisions of the Banking Companies Ordinance, 1962.

5) Please acknowledge receipt.