Government Imposes 5 % Advance Tax On The Foreign Education Fees

Through finance bill 2015-26, the federal government has levied 5 percent advance tax on the funds transferred abroad. This tax is imposed on the amount sent for the educational purpose from Pakistan to other country abroad. 

There was already a tax of 5 percent on the amount that is above 200,000. Now every organization that is concerned with money like foreign exchange companies, banks, remote trade organizations and individuals etc. are responsible for gathering this amount from the remitters sending money outside Pakistan. The financial institutes and banking companies shall gather such advance adjustable tax from a person transferring any sum of money through cheque, interbank transfer, account to account funds transfer, telegraphic transfer, online transfer, mail transfer, payments through internet, direct debit, payments through mobile phones, automated teller machine (ATM) transfers, etc. or other way of transfer like electronic or paper based transfer etc. It is assessed against the income of the remitter sending the payment for the educational expenses.

State bank of Pakistan gives the information to the FBR about the people remitting money abroad for helping their children educating their children abroad.

As the literacy rate in Pakistan is very low and the imposition of this tax from the government created a very disappointing atmosphere & depression among those who want to go abroad for studies. Therefore the government should facilitate the students and take the step to remove the tax levied on the amount that is to be remitted abroad. The tax should only be imposed on the elite class of the society.

Until the government takes any decision to remove the aforesaid tax, it will be imposed on

·         Tuition fee or educational charges

·         Boarding and hostel expenses

·         Amount sent to foreign country for distant learning to any institute

·         Any amount that is credited to foreign education

A month ago, the State bank of Pakistan issued a notification to simplify the methodology for sending the money to another country for the educational and health division.

According to the revised policy, on behalf of students, the banks can transmit the foreign exchange to educational institutions wishing to study in foreign institutions up to $ 70,000. This criterion was for each student according to the every calendar year.

A further amount of $5000 was allowed to send by the banks for meeting their extra expenses including living expenses.

In the health sector, the banks can remit the amount up to $ 50,000 or any amount equivalent to this amount in foreign currencies to the foreign hospitals for the purpose of medical treatments of the students proposed by the significant therapeutic specialists or clinics in Pakistan.

The administrations should consider changing the section 111(4) of the income Tax Ordinance for the purpose to recognize the individuals who are sending the payments in Pakistan.

They included that the relaxation the SBP may give, could be abused as a black money and could be whitened at 5 % advance tax.