The government has introduced a 5 percent censorship advance tax on fees sent by Pakistanis in the other states to meet the expenditures that are related to education. This tax was accepted and introduced in the Finance Bill 2015.

All the financial organizations (such as banks, foreign exchange companies as well as others) and the individuals dispatching foreign currency abroad will be required to collect advance tax from dispatchers. The tax will be adjustable against the income of the person remitting the money.

This tax will be applicable on all educational expenditures which consist of:

  • Tuition fee
  • Boarding and lodging expenditures
  • Payment for distant learning to any institute in a foreign country
  • Any expenditure that can be attributed to foreign education

Last month, State Bank of Pakistan had issued a notification for interpretation of the method for sending fee abroad for education and health zone. Under the revised rules and policies, the banks are permitted to dispatch foreign exchange to educational institutions on behalf of the aspirants who desires to study abroad equal to $70,000, or equivalent to it every students every year, as per the criteria. Moreover, the banks can issue foreign exchange in cash that is equivalent to $5,000 to the aspirants for early living expenditures.

In health zone, the banks are permitted to dispatch foreign exchange up to $50,000 or equivalent in other foreign currencies to hospitals for the medical treatments of Pakistanis based on the endorsement of relevant medical specialists or the hospitals in Pakistan.

The experts of tax claim that government should deliberate modifying the Section 111(4) of Income Tax Ordinance for classifying the person sending fees in Pakistan. They moreover added that the relaxation given by the SBP might be misused like black money engendered in the system might be faded at five% advance tax.

 

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