Growers exempted from withholding tax

KARACHI: The Federal Board of Revenue (FBR) on Friday exempted growers from withholding tax on sale of agriculture produces.

A notification said sale receipts of growers have been exempted from withholding tax.

However, this special exemption from withholding tax is not available on the purchase of agricultural produce from commercial traders.

“Any person purchasing agricultural produce through a commission agent will be required to deduct advance tax at the rate of 10 percent on the amount of commission paid to the agent and tax under section 153(1)(a) will not be deductable on such transactions,” the notification said. 

The said section defines withholding tax of 4.5 percent for filers and 6.5 percent for non-filers on the gross amount payable.

Representatives of flour mills and trade bodies raised the issue of income tax deduction on purchase of agricultural produce, including wheat from growers and commission agents.

Since the agricultural income is exempted under the Income Tax Ordinance, subjecting the growers to the withholding regime on sale of agricultural produce would have been an anomaly and unfair. 

The concerned regional tax offices and large taxpayer units are required to set up a special cell for obtaining and processing the information, documents regarding transactions of agricultural produce.

“It will be the responsibility of the concerned chief commissioner to ensure that all the commission agents, traders of agricultural produce whose receipts have been subjected to withholding tax, are borne on tax roll and filing their returns of income,” said the notification.