All kinds of taxpayers including individuals and proprietors will have to pay tax at source at the rate of 3 per cent on total value of local letters of credit for procuring products from domestic markets, the National Board of Revenue said. In a clarification issued on Sunday, income tax wing of the revenue board said that banks would deduct tax at source at 3 per cent while making payment to the sellers of products under local LCs or any other similar financial agreement for purchasing goods from local market.
The revenue board made the clarification following confusions among tax officials at field levels on deduction of the tax from individuals, proprietors and partnership firms, an official of the NBR said.
In an original gazette notification issued on August 22, it was not clear whether individuals, proprietors and partnership firms fall under the provision in case of purchasing products through local LCs.
Local LCs issuing commercial banks will deduct the tax at the time of payment to sellers or suppliers of the products if the value of local LCs exceeds Tk 5 lakh, according to the provision introduced in the budget for the current fiscal year.
Local LCs for purchasing daily necessary consumer items including rice, onion, pulse, turmeric, chilli, wheat, maize, flour, salt, edible oil and sugar are exempted from the tax.
The provision came into effect from July 1, 2014.
-With New Age input
