Withholding Tax Surges to Rs2.74T in 2023-24

The Auditor General of Pakistan (AGP) disclosed that the withholding tax collection soared to Rs2.74 trillion in fiscal year 2023-24, primarily driven by elevated tax rates imposed on the salaried class, as per a news report.

The AGP’s 2024-25 report on Inland Revenue and Customs highlights that withholding tax collection hinges on the payer acting as a withholding agent, with the at-source deduction mechanism streamlining tax collection and making withholding taxes a dominant share of direct tax revenue.

In 2023-24, Rs2,740.10 billion was amassed under withholding taxes, accounting for 60.47% of the total direct tax collection of Rs4,530.70 billion.

The report noted that among the ten major components of withholding tax, categories like contractual receipts, exports, bank interest, and other payments fall under minimum tax or final tax regimes. Although these are indirect in nature, the Federal Board of Revenue (FBR) classifies them as direct taxes.

Additionally, collections from telephone bills and property purchases were adjustable, but non-filers failed to claim adjustments.

The FBR garnered Rs1,650.75 billion from these specific categories in 2023-24, reflecting a Rs429.69 billion increase from the prior fiscal year, largely attributed to higher salaries within tax brackets, according to the AGP report.