The Council of Islamic Ideology (CII) on Wednesday declared the withholding tax imposed on bank transactions un-Islamic — at a time when the government is trying to achieve the goal of documentation of economy.
In its ruling, the CII said the collection of withholding tax on the money that customers withdraw from banks was unfair.
However, the government had decided to impose 0.8 per cent withholding tax on non-filers daily in the case of daily cash withdrawals exceeding Rs50,000.
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It is meant to discouraging cash transactions and promote digital transactions.
At the same time, the measure is intended to encourage individuals to become tax filers.
But some circles are of the view that the move is encouraging the informal economy and increasing currency circulation.
