In a significant move aimed at documenting the economy and curbing the outflow of foreign currency, Finance Minister Ishaq Dar in Budget 2023-24 announced the imposition of new tax measures.
Finance wizard said the imposition of taxes on cash withdrawals plays a crucial role in documenting economic transactions. As part of this effort, the government has decided to impose a 0.6% tax on cash withdrawals exceeding Rs50,000.
This step is expected to encourage individuals and businesses to shift towards electronic transactions and formal banking channels.
Furthermore, in order to discourage the outflow of foreign currency through bank channels, the government has revised the withholding tax on Debit and Credit Card transactions. The existing withholding tax, previously set at 1%, has now been increased to 5%.
This measure aims to discourage excessive use of foreign currency transactions and promote the use of local currency within the country. However, for non-filers, individuals who have not filed their tax returns, the tax ratio will be even higher, set at 10%.
These tax measures reflect the government’s commitment to strengthening the formal economy and reducing the reliance on cash transactions. By encouraging electronic transactions and increasing the tax burden on foreign currency outflows, the government aims to promote transparency, enhance the documentation of economic activities, and ultimately boost the overall economic growth of the country.