Banks to execute IRD tax deductions tomorrow
In the absence of an official communication from the Treasury or Inland Revenue Department (IRD) on taxes on public accounts, banks have decided to deduct these taxes and remit them to the IRD tomorrow, officials say.
They said that banks have already deducted the taxes such as the 5 per cent withholding tax on interest income for children’s’ savings accounts for April and they will remit these to the IRD tomorrow. “This is the law. We didn’t get any instructions from the Treasury as to not tax the children’s accounts for an example. So we need to adhere to the law,” a top bank CEO told the Business Times. He said that a document should have come to them by Friday (which is when the Business Times called him) but since it hadn’t, they will send the cash to IRD tomorrow.
Under tax reforms effective from April 2018, bank deposits were to be taxed at 5 per cent. The foreign currency accounts (such as NRFC) weren’t exempt from taxes despite many understanding it to be not so. Finance Minister Mangala Samaraweera said at a recent media briefing that minors’ accounts won’t be taxed until they are 18 years, noting that under the earlier Rajapaksa administration they were taxed at 2.5 per cent for interest above Rs. 5,000. Another banker noted that despite the rhetoric, all proclamations need to be made official. “This is why we need to abide by the existing law.”