A notification, SRO787, has been issued to implement the decision that will give relief to big farmers who will not have to pay tax on income from farm produce. — File Photo

ISLAMABAD: The government has exempted agriculture produce from 3.5 per cent withholding tax.

A notification, SRO787, has been issued to implement the decision that will give relief to big farmers who will not have to pay tax on income from farm produce.

The tax will not be levied on agriculture produce like wheat, rice, cotton and sugarcane purchased directly from growers.

A statement issued after a federal cabinet meeting said it had expressed satisfaction over the issuance of a notification by the FBR amending the second schedule of the Income Tax Ordinance of 2001.

The amendment says: “The provisions of the concerned section related to withholding income tax will not apply to the agriculture produce purchased directly from the grower of such produce if the growers provide a certificate to the withholding agent that he is not liable to any withholding income tax.”

Talking to this reporter, Inland Revenue Services (IRS) Member Khawar Khurshid Butt said growers would have to submit a certificate to buyers in case of cotton. However, he said commission agents would have to pay 10 per cent on their commission only and not on the gross transaction.

The major beneficiary of the decision is believed to be the cotton belt of south Punjab, believed to be a PPP stronghold.

Currently, ginners purchase raw cotton from growers and withhold 3.5 per cent tax. This tax was adjustable but caused hardship to the growers.

Mr Butt said the decision would not benefit cotton traders who would have to pay 3.5 per cent withholding tax.

He said the record maintenance period for cotton ginners had also been reduced from five to one year.