KARACHI: Withdrawal of holding tax on dividend income has increased by 27% during the first half of the current financial year due to improvement in corporate sector profits.
According to the Office of the Chief Taxpayer’s Office (LTO) Karachi, the withholding tax collection on profit during July-December 2020/2021 was Rs 9.1 billion as against Rs 7.17 billion in the same period of the previous financial year.
LTO Karachi officials have termed the increase in tax collection as an improvement in the profits of the corporate sector and an increase in the tax rate announced in the last financial year’s budget. Corporate revenues have risen since the Karuna virus lockdown eased, the official said.
In June 2020, the government decided to lift the lockdown and allow normal industrial and commercial activities. This resumption of economic activity helped the corporate sector earn revenue during the first half of the year.
However, officials said the second wave of corona virus epidemics has again threatened corporate profits in the coming months, affecting revenue collection. Officials have also blamed the increase in tax collection on profits at higher tax rates announced in the last budget.
In the case of a profiteer from a company, the tax rate was increased to 25%, where no tax was paid by such a company due to a rebate in income or business losses or a tax credit claim.
However, in such cases the tax holding was fixed at 15%. The Finance Act, 2020 has raised the holding tax rate to 25 per cent to address such discrepancies.
The month of December 2020 saw a massive increase in the withholding of tax collection under the dividend income segment, which may be due to the lockdown after economic activity. In December 2020, the total under this heading increased by 65% to Rs. 2.34 billion as compared to Rs. 1.42 billion in the same month of this year.