SUBJECT: WITHHOLDING OF INCOME TAX UNDER SUB-SECTION 50(5A) OF SECTION 50.

Under sub-section (5A) of section 50, tax was, previously, withheld by the banks at the time of realization of foreign exchange proceeds on account of export of goods by an exporter. Through the Finance Act, 1999, foreign exchange proceeds on account of commission due to an indenting commission agent, have also been brought within the purview of this sub-section.

2. The tax from indenting commission mentioned above is to be deducted by the bank @ 10% of the foreign exchange proceeds as per paragraph CCCCC of Part I of the First Schedule inserted through the Finance Act, 1999. Tax so deducted will be the full and final discharge of tax liability of the indenting agent in respect of such income under section 80C.

3. The banks responsible for deduction of tax under this sub-section are under legal obligation to furnish annual statement as prescribed under Rule 201A of Income Tax Rules, 1982, to be filed by 1st September each year, regarding foreign exchange proceeds and tax deducted therefrom. They should use the same statement to separately report the payments on account of foreign exchange proceeds made to indenting commission agents and the tax deducted therefrom.

(Muhammad Asif)

Secretary (Withholding Tax)

Ph:9202467