In a significant development, the Federal Board of Revenue (FBR) has successfully recovered Rs 23 billion from 16 banks in just one day. This collection falls under Section 99D of the Income Tax Ordinance 2001, which imposes a windfall tax on banks.
The move comes after the Sindh High Court (SHC) dismissed legal challenges to the tax, reinforcing the government’s stance on its imposition.
Sindh High Court Upholds Windfall Tax
The SHC recently addressed petitions questioning the legality of Section 99D of the Income Tax Ordinance 2001 and the related Statutory Regulatory Order (SRO) 1588(I) of 2023, issued on November 21, 2023. These petitions aimed to challenge the framework that enables the windfall tax.
However, the court dismissed all petitions, along with pending applications, stating that detailed reasons for the decision would follow in the official record. With this ruling, the government has solidified its authority to collect the tax, paving the way for the FBR’s swift recovery action.
Rs 23 Billion Collected in Record Time
Following the SHC’s decision, the FBR wasted no time in enforcing the windfall tax. The Rs 23 billion was collected from 16 banks in a single day, showcasing the tax authority’s efficiency and determination. This amount is part of a broader effort to ensure compliance with Section 99D, which targets extraordinary profits earned by banks under specific conditions.
Broader Context: Rs 72 Billion Deposited by Banks
The windfall tax isn’t the only financial update involving banks and the FBR. According to FBR Chairman Rashid Mahmood Langrial, banks have deposited a total of Rs 72 billion by December 31, 2024. This figure reflects contributions following the Income Tax (Amendment) Ordinance, 2024, which introduced changes to the Advance Deposit Ratio (ADR) for banks.
Speaking before the Senate Standing Committee on Finance, Langrial emphasized that the amendment has resolved long-standing disputes between the tax department and banks, marking a turning point in their relationship.
The issue of taxation has historically been a point of contention between banks and the FBR. In the past, banks have taken legal action against the tax authority, particularly over the Advance Deposit Ratio (ADR).
These disputes often delayed revenue collection and created uncertainty. However, with the recent ordinance and the SHC’s ruling, the FBR appears to have gained the upper hand, ensuring smoother compliance moving forward.
The recovery of Rs 23 billion in a single day, combined with the Rs 72 billion deposited by year-end, signals a robust push by the FBR to bolster government revenue. The windfall tax, aimed at capturing excess profits, reflects a broader strategy to address fiscal challenges while ensuring that high-earning sectors contribute fairly to the national exchequer.
For banks, this development may prompt a reevaluation of financial strategies to align with the updated tax framework.
As of February 24, 2025, the FBR’s actions demonstrate a clear intent to enforce tax policies decisively, backed by judicial support. With these funds now in the government’s coffers, attention will likely turn to how they are utilized to address pressing economic priorities.
