Q.1. Withholding tax is levied on the withdrawal of cash from the bank accounts by the customer. The current rate of the withholding tax is 0.3% for Tax filers and 0.6% for Non-Tax Filer. What is your opinion; is withholding tax meant to be a major source of earning for the government or helpful for documentation of the economy? Q.3 Wealth Tax Return form used for the return of net wealth under section 14 of the Wealth Tax Act, 1963 (XV of 1963). Explain the legal importance of Wealth Tax Return proforma?

1. Institute of Management Studies
University of Peshawar
Taxation Management Mid Term BBA 8th June 28, 2020
Q.1. Withholding tax is levied on the withdrawal of cash from the bank accounts by the
customer. The current rate of the withholding tax is 0.3% for Tax filers and 0.6% for Non-Tax Filer. What is your
opinion; is withholding tax meant to be a major source of earning for the government or helpful for
documentation of the economy?
In Pakistan Withholding Tax (WHT) described in the Section 231 A of Income Tax Ordinance is levied on
withdrawal of more than PKR 50,000 from the bank accounts by the customer. The customer accountwill be
debited to give effect of this tax. The main purpose is to bringthe prospectivetaxpayer to the text net, thereby
widening the income tax base. As for non-filers WHTrate is 100%doubleof filers WHTrate so it encourages
people to filetheir Tax returns.
Governments use withholdingtax as a means to limittax evasion and sometimes imposeadditional withholding
tax requirements if the recipienthas been negligent in filingtax returns,or in industries where tax evasion is
perceived to be common.
Main Objective:
The major aimof WHT is to helps in documentation of the economy and keeping/ maintainingcreditdebithistory.
it also helps in tax Calculation, which is ultimately collected by FBR . It helps reducingcash transactions.
Apart from that It controls the expenditures of general public which in turn control the inflation.A filer in ATL
(Active Taxpayer List) can claimfor refund after submittingincome tax return for.
Other Benefits:
As Pakistan is a Cash dominanteconomy, government is ableto earn a huge amount by this.it serves as major
sourceof the Federal revenue collected on national level. Itprovides regular revenue throughout the year for
government expenditure and operations.
Conclusion:
In recent scenario,as of June 2020 State Bank of Pakistan (SBP) has proposed to abolish thewithholdingtax (WHT)
on cash withdrawal frombanks in the upcoming budget 2020-21,that will restrictthe increasingcash-based
transactions in thecountry.
Accordingto the proposals,individuals and businesses havereduced the use of bankingchannels for meeting their
day-to-day financial needs and prefer to keep cash in hand. As the primary object of the withholding taxes on
cash withdrawal from financial institutional was to discourage the cash economy and encourage document ation
for the economy.
However, it had the opposite resultas itis actually encouragingcash-based transactions in thecountry and
resultingin an increasein currency in circulation.Dueto this operational tax,the small depositors avoid keeping
their money in the financial institutionswhich leads to financial disinter-mediation in the country.
It is suggested that the WHT on cash withdrawals should beremoved as it will help improvethe deposit
mobilization and growth of financial inclusion. (Source: The News, June 11, 2020)
Q.3 Wealth Tax Return form used for return of net wealth under section 14 of the wealth
Tax Act, 1963 (XV of 1963). Explain the legal importance of Wealth Tax Return proforma?
Wealth Statement:
Wealth Statement refers to the statement of assets and liability.Itis the statement of all the assets whether
existingor acquired or transfer out duringthe year, all the liabilities whether existingor assumed duringthe year
and all the expenditure incurred duringthe year that is used to assess theactual incomeof an individual.

2. Basically,itis a statement of “total net assets (total assets less total liabilities)” of a taxpayer.This statement
shows the wealth position of a taxpayer on specific datei.e. closingdate(30 June) for that tax year.
There are two parts of wealth statements.
1. Statement of Net Assets: It is a listof all assets and liabilities (personal aswell as business) asatthe closing
date of year i.e. 30 June. Whilethe assets need to be declared by cost atwhich they were purchased,not at
market value.
Example of Assets
1. Agricultural property
2. Commercial,Industrial,Residential Property (Non-Business)
3. Business Capital
4. Equipment (Non-Business)
5. Animal (Non-Business)
6. Investment (Non-Business) (Account / Annuity / Bond / Certificate/ Debenture / Deposit/ Fund /
Instrument / Policy / Share/ Stock / Unit, etc.)
7. Debt (Non-Business) (Advance / Debt / Deposit / Prepayment / Receivable / Security)
8. Motor Vehicle(Non-Business)
9. Precious Possession
10. Household Effect
11. Personal Item
12. Cash (Non-Business)
13. Any Other Asset
Examples of Liabilities
Credit (Non-Business) (Advance / Borrowing / Credit / Deposit / Loan / Mortgage / Overdraft / Payable)
2. Reconciliation of Net Assets: Reconciliation isrequired to be made for total net assets balancewith total net
assets held immediately lastyear so that any change [increase/ decrease] can be identified.
This is very important step in filingwealth statement as any increasemore that net income shall betreated as
income of the person.
Tax Law for Furnishing of Wealth (Section 116 of Income tax Ordinance 2001)
In Pakistan,FBR (Federal Board of Revenue) require every individual whosedeclared or assessed incomeis One
Million Rupees or more to fileWealth Statement/ statement of assets and liabilities (voluntarily) alongwith the
Wealth Reconciliation statement.
Persons liable to file wealth statement u/s 116
• Every residenttaxpayer
• being an individual filinga return of income for any tax year shall furnish a wealth statement and wealth
reconciliation statement for that year alongwith such return.
Legal Importance of Wealth Tax Return
Return filingsaves you from undue unnecessary taxes.
Wealth Tax Return Filingis associated with various benefits as itserves as the proof of wealth and Income .The
followingarethe major benefits availableto the person fillingWealth Tax Return Proforma.
 Tax Refunds/Rebates
Fillingreturns allows you to claimback overpaid tax that has been withheld. Tax Refund shall bedue to the
assesseeif the tax payableon taxableincome of the assesseeis lessthan tax deducted such as TDS (Tax Deducted
at Source), advancetax.
 Lower Rates of Tax Deduction
Fillingreturns gives the assesseeperks of Lower rates of tax deduction at sourceby banks on both profits and cash
withdrawals.Reduction on withholdingtax (tax already deducted from your income and gains) when registering
and transferringmotor vehicles.Lower rate of tax on buyingand sellingof property. Lower withholdingtax rate on
capital gainson saleof securities and prizebond winnings.Charges for tax on dividend will belower.

3.  Proof of (Financial) Life
Tax Return can be used as a proof of your Income and Address. Itis essential for makingany investment and goes
to prove that you have a valid sourceof income to make such investment.
 Create history
By returns every year, a person manages to create your financial record with FBR. This financial/tax history is
positively viewed and favourably used by most agencies with whom you may need to interact, such as :
o Easy Processing of Loans; when you avail any kind of loan (home, personal,vehicleloan,etc), all major
banks and Financial Institutionsrequirethe last3 years Tax returns fi led copies of the assesseeto assess
the income capability of the person.
o Easy Visa Processing: At the time of Visa application or interview,most of the embassies and consulates
require to furnish the copies of Tax Returns for the pastcoupleof years ,when they provide you a travel or
a work visa.
 Government Tender
The Person planningto startor doingbusiness and need to fill a government tender, he needs to furnish the Tax
Return Copies of the previous year to the respective authority or department s o that they can verify or assess the
financial capacity of the person whether he can supportthe payment obligation or not.