FBR TAX ON BANK DEPOSITS NATIONAL SAVINGS POST OFFICE SAVING ACCOUNTS
The Federal Board of Revenue (FBR) has revised the tax rate on
debt-related profits for the tax year 2021. (July 01, 2020 to June 30, 2021).
After implementing proposed changes by the Finance Act of 2020, the FBR
published Income Tax Ordinance, 2001 (updated June 30, 2020). According to an
FBR update, the tax rate that must be subtracted under Section 151 is 15% of
the yield or profit.
In circumstances where the taxpayer provides a certificate to the payer
of profit stating that during the tax year yield or profit paid is rupees
500,000 or less, the rate should be 10%.
According
to the Section 151 of the Ordinance, 2001, the Profit on debt. — (1) Where –
(a) a
person pays yield on an account, deposit or a certificate under the National
Savings Scheme or Post Office Savings Account;
(b) a
banking company or financial institution pays any profit on a debt, being an
account or deposit maintained with the company or institution;
(c) the
Federal Government, a Provincial Government or a Local Government pays to any
person profit on any security other than that referred to in clause (a) issued
by such Government or authority; or
(d) a
banking company, a financial institution, a company referred to in sub-clauses
(i) and (ii) of clause (b) of sub-section (2) of section 80, or a finance
society pays any profit on any bond, certificate, debenture, security or
instrument of any kind (other than a loan agreement between a borrower and a
banking company or a development finance institution) to any person other than
financial institution.
the payer
of the profit shall deduct tax at the rate specified in Division IA of Part III
of the First Schedule from the gross amount of the yield or profit paid as
reduced by the amount of Zakat, if any, paid by the recipient under the Zakat
and Ushr Ordinance, 1980 (XVII of 1980), at the time the profit is paid to the
recipient.
(2) This
section shall not apply to any profit on debt that is subject to sub-section
(2) of section 152.
“(3) Tax
deductible under this section shall be a minimum tax on the profit on debt
arising to a taxpayer, except where —
(a)
taxpayer is a company; or
(b) profit
on debt is taxable under section 7B.
